Eric Morath of the Wall Street Journal writes that the paradox about employment rising and labor productivity can be seen in the behavior of some firms. These firms "have hired steadily in recent years, increasing the total number of hours worked." But Mr. Morath gives examples of firms that are "ramping up hiring of relatively low-wage workers."
These people are hired for the least amount of time possible and the lowest benefits and are supplemented by part-time employees that really need the work. And, with the healthcare legislation of the past few years, people are being hired for less than the minimum required standards so as to keep costs down.
None of the opportunities that arise in these areas are positions that contribute high levels of productivity.
Mr. Morath also mentions that the trend may "reflect lackluster capital investments." The whole investment climate has changed over the past fifty years as the government's efforts to stimulate the economy and put people back into the jobs they used to hold before an economic recession or due to slower than "desired" growth.
The impacts of this capital investment can be seen in the decline in capacity utilization in manufacturing. In the current business recovery, capacity utilization has peaked out at around 78 percent of industrial capital in place.
Note that this is down from the previous peak in 2007 of 81 percent. But, this is down from the peak before that which was 85 percent in 1997. The previous peak before that was 87 percent in 1978. Before that, the peak was 89 percent in 1974, and 89 percent in 1967.
It can be argued that due to the economic stimulation of the government, businesses built its capital structure to put unemployed workers back into the plant and equipment they knew, but that this physical capital became less and less productive and hence is not being used anywhere near capacity and that this is a sign of how government economic policies helped to reduce the productivity of the labor force. So much for unintended consequences.
But the changing nature of the labor market is being reflected in the declining numbers and strength in labor organization. Figures have shown that the membership in labor unions has been declining for quite a few years now. Also, the figures indicate that more than fifty percent of the membership in labor unions is now in the public sector, government and education, and not in business and manufacturing.
This changing environment is even causing some "anticapitalist" writers to talk about the fact that labor unions are legacy and basically ineffective in today's world. For example, Paul Mason, the economics editor of Britain's Channel 4 News and a columnist at the Guardian, is getting a lot of attention about his new book "PostCapitalism: A Guide to our Future," in the Financial Times and The Economist.
Mason, argues that in the past, "when workers untied against the elites" changes were made. That is no longer the case as "technology has turned us all into individuals" that no longer can band together as they once did.
Interestingly enough, the Democratic Party in the United States seems to be adjusting because of the decline in the power of the labor union. According to the New York Times, the Democratic Party is "shifting from a union-powered part organized primarily around economic solidarity to one shaped by racial and sexual identity."
The times, they are a-changin'….
I have just written that "Productivity Growth Must Become a Top Priority in the US." The major reason for this is that the world is moving into a new economic era, one in which the United States is not just the economic hegemon.
We currently see this in the devaluation of China's currency. We see this in the development of the Asian Infrastructure Investment Bank. We see this in the role that China is playing in the developing world.
The United States cannot afford to let its productivity slip any further. The United States government needs to stop focusing on outdated Keynesian policies that attempt to put workers back to work in their old outdated jobs.
Globally, the world is moving into a new economic era and the United States must get its priorities right or it will find itself in a much less competitive place.
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