Productivity Increases As Workers Are Fired

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What’s good for GM is not longer what’s good for America. The supposedly good news that productivity is up, reducing inflationary pressures, is due to the fact that businesses cut their workforces and had those who remained do more.

This has been a long standing practice in large corporations; a lot of staffers are doing what would have been a job and a half or even two jobs eight years ago. And because workplace insecurity is high, no one dares push back. Note that wage gains are lagging inflation.

Japan has had the same pattern since the end of its bubble years: a grinding down of employees due to stagnant pay, widespread use of temporary and part-time workers, and increased demands for output. In Japan’s case, it has helped fuel a robust export sector and a stagnant domestic economy. Is this what America’s future holds?

From Bloomberg:

U.S productivity unexpectedly accelerated in the first quarter, helping combat inflation, as job cuts meant the remaining employees did more work.

Productivity, a measure of worker efficiency, rose at a 2.2 percent annual rate after a 1.8 percent gain the prior quarter, the Labor Department said today in Washington. A separate report showed pending sales of existing homes fell for the fourth time in five months, signaling no end in sight to the housing recession.

Federal Reserve policy makers anticipate that the economic slowdown and weakening job market will contain consumer prices, and today’s figures may bolster their case. Companies trimmed staff hours by the most in five years last quarter as they tried to cope with the housing-led economic downturn, the data showed.

“Productivity is solid and labor costs are slowing and this will take the pressure off inflation and the Federal Reserve,” said Mark Zandi, chief economist at Moody’s in West Chester, Pennsylvania. “Unit labor costs have essentially come to a grinding halt and that should support corporate profits and allow businesses to hold the line on prices.”…..

Hours worked dropped at a 1.8 percent pace, the most since the first quarter of 2003, today’s report showed.

U.S. employers cut payrolls in each of the last four months, bringing the total number of jobs lost this year to 260,000.

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One comment

  1. donna

    Well, duh. SUre, you can get your workers to do more fora while as they take up the slack.

    But ask yourself — where has the real creativity of the U.S. gone? Why are we working harder for less? Hmm. Maybe because workers don’t have that slack time to come up with new ideas anymore?

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