Tag Archives: productivity

The Perpetual Recession: Productivity Up, Jobs Not Up – Where Will The Jobs Be?

Let’s get more innovative.  Let’s get more productive.  Productivity – up, up, up!  Let’s find a way for each worker to produce more.  Let’s find a way for our company to produce more in fewer total work hours.  This is good for the company, this is good for our stockholders.  This is good, this is always good!  And, let’s get even more productive next year, and the year after that, and the year after that…

Right?

This is very good — except when it is bad.

The good is obvious.  People, companies, are more productive.  This is bad because, the more productive each worker is, the fewer workers needed to do the same amount of work.  Thus, no new jobs are created, because we can do more with fewer people.

Thus…the perpetual recession.

That is the key line in an article on Bloomberg.com, Bernanke Employment Goal Elusive as Profits Bring No Jobs by Craig Torres and Anthony Feld.  And it gives more insight re. the ongoing dilemma of:  where will the jobs be? Here are excerpts:

Not far from where Federal Reserve Chairman Ben S. Bernanke grew up, a revolution inside a Campbell Soup Co. plant explains why U.S. corporations are piling up profits — with little need to hire more people.

Workers such as “Big John” Filmore, a 28-year Campbell veteran, huddle every day with management in situation rooms before their shifts to find ways to save money for the company. Rising productivity is helping boost profit margins here in Maxton, North Carolina, where 858 workers turn out a billion meals a year, and at most of the 243 non-financial companies in the Standard & Poor’s 500 Index with rising profit margins.

Companies slashed 8.5 million jobs during the worst recession since the Great Depression, while also slowing capital investment plans. Campbell, the world’s largest soup maker, DuPont Co., the third-biggest U.S. chemical maker, and United Parcel Service Inc., the world’s largest package-delivery business, are asking workers to help save cash by working smarter with existing technology. A potential cost: Efficiency gains reduce the chances recession-casualty jobs will come back.

“When the productivity growth comes, then watch out because that is when companies start not needing so much labor,” Edmund Phelps, a Columbia University economist and Nobel laureate, said in an interview.

Some 142 non-financial companies in the S&P 500 had improvements in operating margins of three percentage points or more from the final three months of 2007, when the previous expansion peaked, compared with the most recent quarter, according to data compiled by Bloomberg as of yesterday.

Firing and Hiring

Yet data released Nov. 18 by the Bureau of Labor Statistics shows that while firing has slowed, hiring hasn’t picked up. Job gains from new or expanding businesses were 6.1 million in the first quarter, the lowest quarterly increase since the recession ended. Job losses from closing or shrinking businesses fell to 6.4 million, the smallest on BLS records going back to 1992.

“We’ve seen remarkable productivity gains in the last year or so in the U.S. economy,” Bernanke told Congress’s Joint Economic Committee on April 14. “We don’t anticipate productivity growth will continue at that rate going forward, but if it does, then that may reduce the number of workers that firms need to bring back in order to meet demand.”

Bernanke and fellow Fed policy makers launched a $600- billion second round of Treasury bond purchases November 3 to boost growth and lower unemployment, which has remained above 9 percent throughout the recovery. The jobless rate held at 9.6 percent in October, a sign that companies still have little need to absorb workers who need a job.

The Minimum

The economy grew at a 2.5 percent annual rate in the third quarter. That’s the minimum needed to keep unemployment from rising further, according to estimates by Fed officials this month.

U.S. corporations “live in a perpetual state of recession” because of fierce global competition, said Tom Schneider, chief executive officer of Washington-based consultant Restructuring Associates Inc., which helps boost efficiency at such companies as London and Rotterdam-based Unilever, the world’s second-largest consumer-goods maker. They have “no expectation that this is a short-term blip.”

As we try to figure out the direction of this still fragile recovery, this is the challenge that perplexes so many.

 

 

Jobs Are Lost To Greater Productivity (And Plenty of the Credit Goes to Wal-Mart)

The law of unintended consequences is an adage or idiomatic warning that an intervention in a complex system always creates unanticipated and often undesirable outcomes.
From Wikipedia

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Recently, I linked to an article about the best magazine articles ever.  (My post here; the main article with the complete list from CoolTools, here).  Many (ok, most) of these are articles I was not aware of, thus, certainly, had not read.  So, I am reading through much of the list slowly.

Yesterday, I read this article: The Wal-Mart You Don’t Know by Charles Fishman, from December 1, 2003, Fast Company.  It is a valuable article — giving genuine insight into what has happened in today’s work world.

First, here is the message in a nutshell:  Wal-Mart demands a lot from its suppliers.  A whole lot.  Suppliers have to produce more and more, at the lowest possible price, to meet Wal-Mart’s expectations – or they lose the account.  And the account at Wal-Mart is pretty much the whole ball game in the USA.

And, though very, very demanding, Wal-Mart is not lacking in integrity:

To a person, all those interviewed credit Wal-Mart with a fundamental integrity in its dealings that’s unusual in the world of consumer goods, retailing, and groceries. Wal-Mart does not cheat suppliers, it keeps its word, it pays its bills briskly. “They are tough people but very honest; they treat you honestly,” says Peter Campanella, who ran the business that sold Corning kitchenware products, both at Corning and then at World Kitchen. “It was a joke to do business with most of their competitors. A fiasco.”

But, though this article says plenty about Wal-Mart and its practices, it actually says something deeper.  First, this key quote:

Carey, a partner at Bain & Co., says, “for any product that is the same as what you sold them last year, Wal-Mart will say, ‘Here’s the price you gave me last year. Here’s what I can get a competitor’s product for. Here’s what I can get a private-label version for. I want to see a better value that I can bring to my shopper this year. Or else I’m going to use that shelf space differently.’ “

Throughout the article is this one undeniable fact – any supplier that provides a product at one price this year is expected to provide it next year at a lower price.  Or else!

Thus, all suppliers have to be meaner, leaner, pulling more productivity out of each worker, making more products for less money, year after year.

Here is the unintended consequence:  this has helped fuel the rise of productivity, and thus, contributed to a great loss of jobs.  Because if a company has to produce more for less, one of the “less” factors is the factor of producing more with fewer workers.

And, ultimately, as fewer workers produce the same or greater output in one company, this leads to a grand total of fewer workers overall.

Bob Herbert, this morning in the New York Times, has this:

At some point we’re going to have to claw our way out of this denial. With 14.6 million people officially jobless, and 5.9 million who have stopped looking but say they want a job, and 8.5 million who are working part time but would like to work full time, you end up with nearly 30 million Americans who cannot find the work they want and desperately need.

We’ve got more and more people in our working-age population and fewer and fewer jobs to go around. Mr. McMillion tells us that there are now 3.4 million fewer private-sector jobs in the U.S. than there were a decade ago. In the last 10 years, we’ve seen the worst job creation record since 1928 to 1938.

There are a lot of reasons for the loss of jobs.  But, one reason is that we have simply gotten so very much better at producing more with fewer people.

And as good as this is for productivity, and prices, the unintended consequence leading to overall job loss is looking like a true nightmare.

The Netflix Prize is Brilliant –- but Is it fair?

The tech observers will be weighing in on the Netflix wikinomics prize given to the best idea to improve their “recommendaiton software.”  (See my earlier post, “Everybody” Knows More than “Anybody” — Netflix Awards a Prize in the Era of Wikinomics).  Slate’s technology writer, Farhad Manjoo, thinks the whole concept was brilliant.  He wrote, in  The Netflix Prize Was Brilliant: Google and Microsoft should steal the idea, that Netflix could have never hired as many innovators as actually worked on the project (they all had other jobs); they would have never worked this diligently on the assignment without the potential of the prize money; and, if it had simply been an open source project Netlfix would not own the winning software outright.  But here was the line that got my attention: As Netflix CEO Reed Hastings admitted to the New York Times, “You look at the cumulative hours and you’re getting Ph.D.s for a dollar an hour.”

I think, as I said in my earlier post, that for such a massive innovation project this wisdom of crowds/wikinomics approach is perfect, it subtly reminds us of another development in our current economic climate.  Though this is a really good way to innovate, is this another example of increasing productivity with lower wages?  Admittedly, all of those who worked so diligently to win the prize did so “voluntarily,” with the hope of the prize as their motivation.  It would have cost Netflix far more than the one million dollars they spent to obtain this outcome if they had hired all of these innovators.  Getting more work for less money out of people seems to be the dominant direction in this increase productivity at lower cost era.

It turned out great for the winners.  Another team came in 20 minutes late, and won nothing.  The winning team had seven members.  The team that was 20 minutes late had 30 members.  And many others worked many, many hours and also did not win the prize.  Netflix got an exceptionally good return for its investment.

Is this good, or bad?  It is certainly good for Netflix.  And good for customers of Netflix.  Is it good for the worker?

In an age of stress, you can incorporate “energy builders” into your life

The Other 90%

The Other 90%

It’s Monday morning.  Time for a Monday morning quote:

First thing Monday morning, do you wake up envisioning – “Another week of stress and strain at work” – or “Another chance to do more of the things I love”?

This is one of the many fine quotes from the book by Robert Cooper, The Other 90%:  How to Unlock Your Vast Untapped Potential for Leadership and Life.

I’ve been thinking a lot about issues of time/energy management lately.  Recently I wrote this post:  Is Everybody Tired, or is it Just Me? — Energy and Time Management in the Midst of Challenging Times.  And I sense that a whole lot of people are tired.

I teach a few classes at one of the Dallas County Community Colleges as a member of the adjunct faculty.  I am meeting quite a few fellow faculty members who teach the maximum number of classes, and then they also teach in other colleges outside of the district.  They run from one engagement to another, piecing together a living.  Independents (like me) especially have this problem.  And the constant shift; the fact that they do not “go” to work, but they go from task to task, from “job” to “job,” adds to the stress.

But it’s not just independents.  The people with “normal” jobs are equally stressed.  Have you seen the latest productivity numbers.  America’s productivity is up, but so is unemployment.  The same (actually fewer) people are churning out more and more work.  Productivity is up because individuals are doing more and more.  Here’s the report summary:

The Washington Post carries an AP story this morning reporting that productivity rose by an annual rate of more than 6 percent during the second quarter, while labor costs plummeted. As the story notes, productivity, or output per hour of labor, is often “a key ingredient for rising living standards,” but in recent months companies have been using the output gains to cut costs and bolster their bottom lines. A related Wall Street Journal story offers further explanation. “The net result” of businesses squeezing more work out of fewer employees, the Journal writes, is “rising unemployment, stagnant wages, sagging consumer confidence — and better-than-expected corporate profits.”

So, for this Monday morning, I present a list of suggestions, things to do to help with the stress.  These come from the Cooper book, The Other 90%.  And when I remember to do these, I can tell you that they help.  Here’s the list:

• The seven elements of  a “break”:
• Deepen and relax your breathing.
• Change your view and catch some light.
• Re-balance your posture and loosen up.
• Sip ice water.
• Enjoy a moment of humor.
• Add some inspiration.
• EAT SMART.

• Start the day right:  without a bang…
• Awaken without a jarring alarm.
• Turn on the lights.
• Get at least five minutes of relaxed physical activity.
• Enjoy several bites of a great-tasting breakfast.

Very practical.  And I have tried to incorporate a few of them.  For example, I have changed my alarm to a soothing “harp” choice (from my iPhone.  It really is less jarring).  I do sip ice water (he recommends cold, ice water .  I don’t know why – but it works).  And I periodically click on one of Andrew Sullinvan’s “mental health breaks” links (not always humorous, but always a nice distraction).  Here’s one.  And for inspiration, I read constantly — including the blog posts by Bob Morris on this blog

So – on a Monday morning, think about how you can begin and spend your week with passion and energy.

Good luck.

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• You can order the synopsis of my presentation of The Other 90%, at our companion web site, 15 Minute Business Books.