Punchinello’s Chronicles

September 11, 2008

What’s Productivity?

Filed under: Butterfly Wings — Punchinello @ 10:22 am
Tags: , , , ,

I’ve worked in lots of corporate offices, and we always hear about “productivity.” It’s like a jargon term, and nobody feels much like explaining it. One way is to say that if you’re getting paid by the hour to do some work, then the amount of work you do should equal the value of what you’re being paid.

That’s all well and good, but it really doesn’t explain productivity as a word used in economics. Since hardly anyone, these days, gets an education in basic economics, I needed to go find out stuff. It turns out that Productivity involves a question I’ve had all my life: What, exactly, is being created here?”

When we talk about productivity we’re also talking about producing something. That “something” ought to be real, useful, tangible, and valuable! If I’m a filing clerk, what am I producing? Organization of some sort. That’s real, but it’s intangible, hard to measure, and hard to value in terms of money. How much money is it worth to a big corporation to have their files in the right place?

But compare the value and end result of a nicely organized filing cabinet with a new hybrid car. The “output” is whatever’s being produced, so a filing clerk outputs a bit of organization in a large company. But a hybrid car is a long-lasting, expensive thing. It also requires a whole bunch of jobs to produce that car. If the only place you can buy that car is in America, then the production output also gives us something to sell…to export.

Since the 1980s, America has been producing less and less in terms of high-end production items. Instead, we’ve been moving toward low-producing services, which are expensive to maintain and don’t produce anything worth exporting (selling to someone outside the country). Additionally, the amount of time and effort that goes into the service, usually comes close to balancing what comes at the end of the service.

Think about the fire department, a service industry. When your house is on fire, many people come rushing over to put out the fire. All those people have ongoing wages, and there’s a lot of expensive equipment they need in the job. If the house burns down, the value of your house and possessions takes away from the cost of the equipment used to try and put out the fire.

If your house doesn’t burn down, or you don’t even have a fire in the first place, you’re still paying money on a regular basis to maintain the fire department and all the equipment, not to mention the water system and dispatch communications grid. All of that is money being spent, without much in return. It “produces” a feeling of safety, and helps promote a peaceful life, but economists don’t measure “feelings” and intangibles as part of the “productivity” numbers. And, of course, how often do we sell a fire department’s services outside the country?

Another example is a security guard. We use jobs to produce a TV, for example, which people buy and put into their homes. With increasing crime and the catch-and-release environmentalism of releasing burglars back into the community, people don’t feel safe after they’ve “consumed” (bought and paid for) their TV. So they either install a robotic alarm system, or hire a security guard. They’re paying ongoing wages to guard an old product that’s already been consumed. The net result is a loss of money for no gain in new “things.”

What does America actually produce these days? We import a whole lot of our oil, we get food from everywhere outside the country, and we’ve outsourced all kinds of service jobs. The small business sector is growing exponentially, and also produces real things for people to buy (and send us money). Yet on the larger scale, the government seems to want to regulate, obliterate, tax, and control everything that has even a chance of producing anything we can sell.

How come we don’t just open up the Alaska oil fields, start producing our own energy, then sell the remainder on the open market? When was the last time we had an American success in terms of inventing AND selling a new product? We invented video recorders, but who makes them? What about CDs and DVDs? How about airplanes, construction machines, ships, cars, textiles, consumer technology? Where’s the “Made in America” that brings money into the country?

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