Yoshie Furuhashi wrote: We should make wages relative to labor productivity an issue, though.
Doug: Good luck explaining the concept.
productivity isn't very hard: you can talk about the effectiveness of labor.
------------------------ Jim Devine [EMAIL PROTECTED] & http://bellarmine.lmu.edu/~jdevine
Yes, if Stephen Roach and _Dollars and Sense_ can discuss real wages relative to productivity rises, so can Jim Devine, Doug Henwood, and other Progressive Economists:
***** "The once tight linkage between trends in productivity and real wages in the U.S. economy," Morgan Stanley's Stephen Roach points out, "appears to have been broken." During Ronald Reagan�s eight years in office, productivity grew a total of 11.4%, but real compensation per hour (wages plus benefits) rose only 4.0% -- so only one-third of productivity gains went to workers. Since 1992 output per hour has grown 2.1%, but compensation declined 0.2%. This is good news for business, but not for workers, whose real wages have stagnated or fallen.
Clinton's inability to reforge the link between productivity and wages has devastated social equity, forcing, in Roach's words, "a dramatic shift in the distribution of income away from the agents of productivity, workers, toward the owners of capital."
(John Miller, "Putting People First? Clintonomics and Post-Prosperity Capitalism," _Dollars and Sense_, September-October 1996, <http://www.dollarsandsense.org/archives/1997/0996miller.html> *****
***** As of 1997, the average real wage for non-supervisory workers in the U.S. was 14% below its peak in 1973, even though average worker productivity rose between 1973 and 1997 by 34%.
(Robert Pollin, "The Natural Rate of Unemployment: It's All about Class Conflict," _Dollars and Sense_, September/October 1998, <http://www.thirdworldtraveler.com/Economics/NaturalUnemployment.html>). *****
***** What about Business Week's second assertion: that workers received 99% of the gains from faster productivity growth in nonfinancial corporations during the 1990s, therefore denying owners of corporations "their fair share"? That is suspect as well.
According to Business Week, productivity gains during the 1990s added $812 billion (in 2001 dollars) to the decade's output. After massaging the data, author Mandel shows a whopping $806 billion of the gains going to workers. But in figuring workers' gains, Business Week counts not only wage increases but also gains "in the form of more jobs and higher compensation, including exercised stock options." While more jobs do help the unemployed, they don't add to the compensation of workers who already hold jobs. Also, much of those compensation gains came from the increased cost of benefits, especially health benefits. Finally, including stock options underlines the fact that Business Week's definition of "worker" includes upper-level management, including CEOs. And CEOs surely did make out during the 1990s: An earlier Business Week study found that the average CEO of a major corporation made 85 times the average hourly worker's pay at the beginning of the decade, and a staggering 531 times by the end of the decade.
What about other corporate investors? Based on Business Week's formulation, you might think that corporate profits increased by just $6 billion during the 1990s. Far from it. Business Week actually puts the figure at $559 billion -- "a truly striking performance," according to Mandel. However, Mandel says that those increased profits came about, not because of productivity gains, but "mainly because companies paid lower interest rates on debt." Since lower interest rates reduce returns for bond investors, who often also own stock (and thereby corporations), Mandel refuses to count those savings as gains for owners of corporations. Deducting the savings in interest costs leaves owners of corporations with just $6 billion in profits due to productivity gains.
But the truth is, it's impossible to know the source of that $559 billion in corporate profits. The profits could just as well have come from savings due to productivity gains as from savings from lower interest costs-or, for that matter, from other sources, like savings from lower inventory costs or lower prices for imported raw materials.
But let's suppose that workers really did see $806 billion in additional compensation during the 1990s, while owners of corporations got $559 billion in new profits during the decade. Would that make the 1990s the decade of the worker?
Not hardly. Even allowing for Business Week's broadest possible interpretation of gains to workers, owners of corporations would have enjoyed an 83.6% increase in their profits over the decade, while workers would have seen the monies coming their way increase by just 13.6%. Owners of corporations would still be the big winners of the 1990s.
(John Miller, "'The 1990s, the Decade of the Worker': _Business Week_'s April Fool's Joke," _Dollars and Sense_, July/August 2002, <http://www.dollarsandsense.org/archives/2002/0702econ.html> ***** -- Yoshie
* Bring Them Home Now! <http://www.bringthemhomenow.org/> * Calendars of Events in Columbus: <http://www.osu.edu/students/sif/calendar.html>, <http://www.freepress.org/calendar.php>, & <http://www.cpanews.org/> * Student International Forum: <http://www.osu.edu/students/sif/> * Committee for Justice in Palestine: <http://www.osudivest.org/> * Al-Awda-Ohio: <http://groups.yahoo.com/group/Al-Awda-Ohio> * Solidarity: <http://www.solidarity-us.org/>
