The spirit of Jean-Baptiste Say must be haunting the corridors of the CEA.
Did anyone else notice this gem from the new Economic Report of the
President (Feb 94)?
<quote>
Box 3.4 - Why productivity growth does not cause unemployment.
Productivity growth need not cause an increase in unemployment because, as
productivity rises, more goods can be produced with the same number of
workers. This means a cost saving, which must result in either increased
profits, increased wages, or lower prices. If profits or wages increase,
those benefiting from the increase will increase their spending. If prices
fall, consumers' incomes will go further and they will buy more. In any
case, the increased spending will lead to the purchase of more goods and
services, which will create new jobs offsetting losses from the
productivity increase. If the new jobs created are not equal in number to
the jobs lost, there will be a tendency for wages to change to equate
supply and demand for labor. Nonetheless, in the short run some workers
are likely to have to change jobs...[which] can be a traumatic experience
for the established worker.
<endquote>
The authors of this gem seem not to have consulted table B-47 at the back
of the very volume these words appear in, showing nonfarm productivity up
15.9% between 1982 and 1983Q3, and real compensation up 6.6% (a number
inflated by health benefits). The contrast for manufacturing would be much
more vivid.
Doug
Doug Henwood [[EMAIL PROTECTED]]
Left Business Observer
212-874-4020 (voice)
212-874-3137 (fax)
