Are you suggesting that manufacturing efficiency as measured by labor used has increased at a compound rate of 4.5 percent every year for the last 60 years? Anybody wants to comment on how realistic that is?
It's way too high for some industries and way too low for others. The long run increase in productivity is around 2% per year over all industries but this is because what we gain on the manufacturing side is soaked up by the services attached to industrial production and agricultural production and investments in capital goods just to keep up with the changes. Certain aspects of production like efficiency in power generation and semi-conductor products have followed an almost parabolic curve over their development only to flatten out to the long run rate as each product became obsolesced.
The problem for economists, and it's a big one, is that productivity is always measured in dollars of output divided by units of labor from one period to the next. Some things are measured in units because they easily lend themselves to units and those products are reasonably steady over time even though they can have vast changes in features included and quality improvements, like houses and cars.
The problem with using only dollars (as Leroy has done using the GDP-BTW you can easily disprove his 14% for yourself by using the constant dollar GDP-we manufactured 500% more in 2004 in constant dollars than in 1947) is that there is little accommodation for units. This is why there is so much disbelief when I say we make so much more stuff, the "stuff" is counted in dollars as far as the GDP is concerned.
To use a real world example, a plant manages to increase the output of say something like memory chips by 1000 percent over a period of time using the same amount of labor, but because every one of your competitors has managed to do the same thing the price falls to the point where the dollars of output per unit of labor are lower than they were before, you have gone backwards in terms of productivity as it is measured today. There is no question that your manufacturing efficiency is higher than it was before but now you are out of business because the market can't absorb the increased output. Plus, your output might be for a product which has now been replaced by a newer better chip so all the efficiency in the world isn't going to result in increases in revenues. Think of the huge inventory write downs in 2001-2002 as it became clear that there was not enough demand to soak up the huge supply of communications gear produced because not only had production bottlenecks been removed there were discontinuous advances in FO technology requiring far less FO equipment for the same throughput.
This is one of the stickiest problems facing economists, how do you measure output over time when the mix of products is constantly changing, constantly being replaced. It's easy to look at something like an agricultural commodity (the output as measured in tons and the fall in individuals employed in farming has been breathtaking over the last hundred years) or something like coal mining (here also) and measure the tonnage and compare that to previous periods. But how do you take a broad mix of products like we have in the manufacturing sector and try to average out productivity gains using output of units? Mostly what they do is chain (one year to the next year) indices because while there is a large difference in mix of products over sixty years the changes are less abrupt over two years. But the bean counters always, in the end, resort to dollars of output. It's not a true measure of output for many reasons.
In the last 60 years products which were completely out of the reach of people with ordinary incomes have now reached the point of being disposable. This would never have become possible without the cost to manufacture real goods falling at a high rate. The real cost (as measured against income) to produce a good has become a very small part of the final price.
For a few comparisons simply try taking the revs and dividing by the number of employees and putting it into constant dollars. At one time the US had the largest steel plant in the world, it employed 300,000 people, enough to fill a medium sized city. Today the same tonnage can be produced by 2800 employees and a lot of capital equipment. Seven guys can move a container ship with tons and tons of cargo thousands of miles across an ocean. Two crane operators can unload it. In 1982 I watched three people mine more coal in an hour than 30 men could have mined in a week back in 1955. It's relentless, this process of producing more with fewer people.
If you really want to get into the nitty gritty you might need to delve into the numbers first hand. By all means, don't take my word for it. The US has some of the best documentation available of any of the industrialized countries that covers the counting of goods produced here. |
