Monday, May 25, 2009

Productivity Schmoductivity

You know how politicians love to talk about how the US worker is the most productive in the world?

That's based on GDP / hours worked.

So the US Worker has produced more GDP per hour than any other country by a safe margin.
http://www.nationmaster.com/graph/eco_ove_pro_ppp-economy-overall-productivity-ppp
(Ok. Except for Luxemberg. Actually, Ireland has been pretty high too lately. Both are tax havens, so a lot of foreign companies with virtually no workers dump $$$ there, which distorts the "productivity" number.)

US productivity kept growing and growing. Greenspan attributed it to technology - improving worker efficiency.

I think the truth is, a lot of it was the growth of the Financial sector. In 1973 it made up 16% of Corporate profits.
The recent peak put it at 30%. I think it made up something like nearly 20% of GDP at one point (I can't find the exact number).

So, with Financials of all sorts (banks, insurance, investment banks, brokers) all in the toilet, what happens to that big clump of GDP?
It was a fantasy. And Financial "productivity" was absurdly high. Very few employees per $ earned.
So with that collapse, productivity will go way down. Republicans are already saying it's because people aren't working as hard and they're going on welfare and all that. But it's the banks. (And housing distorted things too - towards the end. Though housing is more labor intensive, of course).

PKrugman about the growth of Financials way back in '07. The huge strength on growth and the "miracle of the American Worker" was basically propaganda.

Because so many hours (e.g. Wal*Mart) are off the books and US workers put in so many extra hours that the Bureau of Labor statistics don't record (illegal alien hours add to GDP but don't count in the BLS Productivity number).

On top of that, high medical costs actually add to the productivity number! Hospital GDP is still GDP!

Productivity-wise, we're closer to France than anyone wants to admit.

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