Newly released figures of the Department of Labor show that productivity has sharply increased in the second quarter of 2009 but employers’ labor costs have plummeted. To analyze these numbers, The Real News spoke to Richard D. Wolff, economist at the New School in New York City, who speaks on whether these numbers are good for workers.
JESSE FREESTON, PRODUCER, TRNN: As talk of economic recovery picks up in the United States, figures released this week from the US Department of Labor have shed light on what such recovery might mean. Over the months of April, May, and June, worker productivity rose 6.4 percent, while unit labor costs—the amount of pay and benefits workers receive per unit of their output—dropped by 5.8 percent. The Real News spoke to Richard Wolff, professor of economics at the New School, about the meaning of the numbers.
RICHARD WOLFF, ECONOMIST, THE NEW SCHOOL: The recently announced productivity numbers say something very profound about what is going on here in the United States. Basically, the job of the productivity numbers is to measure the total amount of goods and services that result from an average worker’s hour of his or her labor. Now, obviously, when a worker produces more goods and services per hour of his or her work, that means there are more goods and services available for that worker’s employer to sell, and that employer then enjoys higher revenue. So then the question becomes: clearly the employer is better off; is the worker better off? If the worker were paid 6.2 percent more in wages at the same time that the employer has 6.2 percent more of output, then the gain to the employer would be matched by the gain to the worker, allowing the worker to share in the fruits of his improved productivity. But over the last period, what was striking about the statistics is that workers’ wages went up by about one half of 1 percent, whereas what they produced for their employer went up by over 6 percent. That is a stunning difference. It means that the overwhelming bulk of the increased productivity of the workers in America went to their employers, and only a tiny proportion went to them. Here we are in the depths of the worst economic downturn since the Great Depression of the 1930s, and the way in which this economy is coping is to widen the gap between the employers and employees. The long period of time, roughly 30 years, during which the gap was already growing, not only is that not being reversed in this crash, but it is actually being made worse. Employers are economizing on workers, laying them off, making the workers who remain work that much harder, because they have to do the work that used to be done by the other employees that were fired. The best guess of the economics profession as to why productivity rose so much is precisely that, that massive layoffs meant that employers had terrified workers, who would, in order to hold on to their jobs, work longer, work harder, work faster, and thereby produce so impressive a rise in productivity.
FREESTON: Many economists are suggesting that any so-called recovery that doesn’t include increases in employment and wages doesn’t address the fundamental causes of the crisis and will only lead to a deepened recession in the near future.