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The Mysterious Productivity Lead of the US Economy
Source Michael Perelman
Date 07/09/03/20:38

The International Labour Organisation just released a report showing
that labor in the United States is the most productive in the world.
Four points are relevant here.

First, part of that productivity reflects the fact that workers in the
United States spend more time on the job than workers elsewhere. Even
so, the output per hour is still the second highest in the world --
after Norway.

Second, conventional economics teaches us that wages reflect
productivity, yet for more than three decades hourly wages (corrected
for inflation) have shown a slight decline, while productivity has
soared.

Third, a country can become more productive merely by shutting down some
of its less productive operations. In that sense, increasing
productivity can be nothing more than an indication of
deindustrialization. I don't think that is the case here, but the
ongoing illumination of less productive businesses has been a factor.
According to conventional theory, deindustrialization could mean rising
wages for the same reason that productivity increases. By eliminating
the low salaries, the average of the remaining salaries would be higher
-- except that the resulting increase in unemployment allows business to
drive wages down.

Fourth, productivity can mean something very different from what people
might think I was productivity. This statistic is nothing more than the
gross domestic product divided by the amount of labor. Consider a
fictitious country named Nike. It has a single product -- shoes, which
it can market throughout the world. This country has four workers: a
lawyer to make contracts, a marketer to advertise the product, a
shipping clerk, and an accountant. Rather than making shoes by
themselves, they contract with a sweatshop in China which sells them
shoes for $5 a pair. The country exports 4 million pairs of shoes year
for $100 a pair.

A statistical agency would credit each of the four workers with
producing a million shoes, representing a net increase in value of $95
each. Nike would certainly be the most productive country in the world.
Or would it be?

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