(...) wage gains for the average worker have lagged behind productivity since the early 1980s (...)According to them, this discrepancy arises because the statistics published by the Department of Labor use an inadequate measure of productivity. As is common practice in all econometrics, Labor Department defines productivity as simply "output per worker per unit of time." So an increase in the amount of output produced by an average worker in, say, one working day means an increase in productivity, regardless of the cause of said increase. This is wrong, the NYT writers argue, because
(...) labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures. The result is an apparent drop in the number of worker hours required to produce goods — and thus increased productivity. But actually, the total number of worker hours does not necessarily change.This argument has two fatal flaws, one factual and the other theoretical. The factual one is: wages have not been lagging behind productivity since the early 1980s. An argument could be made that they've been lagging since early 2000s, but even that isn't entirely clear. The theoretical one is: even if what they're saying were true, the "problem" with the productivity measure that they point out couldn't possibly be the reason. Suppose for the sake of the argument that they're right: indeed the "total number of worker hours per unit of output did not actually change." OK but so what? Some of those worker hours (namely the off-shored ones) have become radically cheaper from the employer's point of view. If their assumption were true then, we should still see an increase in the wages of American workers. Which, as you recall, they say isn't happening.
Another confused part of the op-ed is the way of fixing the problem of measuring productivity that the writers propose. They argue that increases in output due to off-shored labor shouldn't be counted as productivity gains; instead, they want to classify as productivity gains only those efficiency increases that happen in the U.S. (such as research and development, new technologies etc.) This is an example of a useless distinction. Suppose you're running a company here in the U.S., and part of your production process is analyzing data. The analysis is done by your workers that you pay some amount $X an hour. Now suppose you came into possession of a piece of software that can analyze your data faster and cheaper than your workers can. Or, suppose you signed a contract with a Chinese company that has workers which can analyze your data faster and cheaper than your workers can. Economically, what is the difference between those two situations? The answer is: none whatsoever. In both scenarios, output per American worker per hour will increase; less of American workers will be analyzing data (you will either assign them to different tasks or reduce employment); your profits, as well as your American workers' wages will increase. From the point of view of American workers and their employers, the economic effects of free trade are exactly the same as the effects of implementing a new technology.
Moving away from the NYT article but still staying on the topic of worker productivity: there is another common misconception about productivity gains, and that is that they can only happen due to people working harder than before. The truth is almost always the other way around. Take farmers, for example; today's farmers in the U.S. are incomparably more productive than their 1800s counterparts were. But they don't work harder; in fact, their workload is incomparably lighter now than it used to be. Their productivity gains are due to things like fertilizers, tractors, genetic engineering etc. The most important engines of productivity gains are technology and trade.
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