Posts Tagged ‘productivity’

How productivity creates jobs … and how gov’t stifles productivity.

July 17, 2012

Nice piece in today’s WSJ … here are snippets:

Punch line: Productivity — the ultimate engine of growth and better living standards — always  swims upstream against those that fight it. Unions, regulations and a bizarre tax code  lock in the status quo.

But, doesn’t productivity — getting more output with less inputs — destroy jobs?

Sure, but it creates way more than it destroys by creating technological avenues and lowering the cost of business

So how does productivity result in more employment?

Some new technology comes along that allows something never before possible. Cash from an ATM, stock trading from an airplane’s aisle seat, ads next to Google search results.

Cheaper technology becomes a platform for others to create or expand businesses that never before made economic sense. Think, eBay and Amazon.

Productivity  attracts capital to satisfy new consumer demands. In a competitive economy, productivity—doing more with less—always lowers the cost of products or services:

And, private investment does a better job of allocating capital than any elite economist or politician picking pork-barrel projects and relabeling them as “investments.”

Entire WSJ article is worth reading

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Told you so: Companies emerge from recession more productive.

April 12, 2012

Way back in July 2009, we posted “Private sector jobs won’t be coming back any time soon”

Our logic was basic business:

First, you can’t let a good crisis go to waste, right?

Businesses always use tough economic times to clean house.

Fat builds in all organizations over time. In “normal” times, it’s difficult to get rid of dead wood. Employment laws – perhaps well-intended originally –- serve to protect slackers by making it cumbersome and difficult to fire anybody.

When the economic tide rolls out, companies have the air cover they need to resize and purge under-performers en masse.

The tendency is to cut deep. If some muscle gets pared too, so be it. It can be rehabilitated later.

In typical business cycles, employment is a so-called lagging indicator of an economic rebound. That is, when the economy starts to recover, jobs are usually added back very slowly.

Why?

Because businesses have a renewed zeal for productivity, they recommit to keeping the fat from building up again, and they want to be sure that the signs of better economic times aren’t false positives.

Fewer jobs will get added back than history would suggest, and those that get added back will materialize later than past patterns.

Businesses will add jobs as a last resort rather than trying to build capacity ahead of the economic growth curve.

Well, the WSJ has confirmed our prognosis in an article titled: Large Corporations Emerge from Recession Leaner, Stronger—and Hiring Overseas

Overall, the Journal found that S&P 500 companies have become more efficient — and more productive.

In 2007, the companies generated an average of $378,000 in revenue for every employee on their payrolls. Last year, that figure rose to $420,000

Such efficiency moves are essential for companies to be competitive.

But economists warn that improved efficiency and continued executive caution are slowing the recovery.

“What’s best for an individual firm may not be best for the overall economy,”

Yeah, but, you just can’t let a good crisis go to waste …

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