Roger's Rants

Cause of the Decline in American Productivity

Saturday, Mar 23, 2013

One reason for the American industrial decline has been attributed to the reduction in productivity growth. While America once led the world in productivity (with fewer paid vacation days and longer work hours). But that has changed, and now we find ourselves competing with the under-developed nations of the world for our jobs.

But is this decline in productivity due to the American worker?

Several years ago when I was working for a large retailer I calculated that if the president of the company’s salary was eliminated from the company’s expenses it would allow everyone of the other thousands of employees to be given a raise of over $10,000 each. But, of course, taking away that highly compensated senior manager’s salary and bonus and giving it to the workers whose sweat and effort created that wealth would not change the overall productivity of the organization (except for that one-ten-thousandth of a person who lost their job as president).

On the other hand, those dollars could have been spent on hiring new employees to perform additional work processes and thus increase the organization’s productivity. In this case roughly 25% more workers could have been hired (since the average salary was about $40,000 per year at the time). And this would have resulted in a 25% increase in productivity.

Or to be more accurate we need to consider the capital needed for plant and material to be used by those new employees. At that time it cost about $2 million to set up a new store. (Now it costs more, but we are talking about what could have been done at that point in time when I originally made these calculations). And so only about half of the annual savings from the elimination of the president’s salary and bonus could be used for actual new employees and the other half spent on the one time cost of additional plant and materials. This still leaves us with about a 12% annual increase in productivity … which most companies would be more than happy to achieve on a continuing basis.

Thus it can be argued that the decline in productivity of the American worker is not due to their own lack of discipline or declining work ethic. Rather it is due to the greedy increases in the salary and bonuses of American corporations’ senior managers and their self perpetuating boards of directors … rather than their investment in additional workers that actually produce goods and services … that has caused the decline in American productivity.

Roger

The Reason for the Collapse of American Manufacturing Jobs

Saturday, Mar 23, 2013

I was sitting in my ophthalmologist’s office this week and picked up the current issue of Time magazine. It had an article discussing why Detroit was in such trouble. Part of the blame was placed on the auto industry and auto workers union for joining forces in allowing worker’s wages to rise to unsustainable levels. They almost had me convinced of the correctness of their argument the workers had brought the collapse of the auto industry upon themselves for demanding wages that allowed them to attain a “middle class” standard of living.

But then I thought about the collapse of the American textile manufacturing and furniture manufacturing industries in my home state of North Carolina. Their non-union wages were about one-third to one-half the level of those paid to the unionized American automobile manufacturing industry workers. And still their jobs had suffered the same fate as the auto workers jobs! So “middle class” wages being paid to American workers is not the cause of the disappearance of America’s manufacturing industry jobs.

Instead it has been the willingness of top managers to diminish the value of the worker’s contribution to the manufacturing process causing the collapse of a multitude of American industries. Whenever the management of a company decides to move its manufacturing off-shore where a desperate worker is willing to work for less than his American counterpart (primarily because that worker is willing to accept a lower standard of living), the value of the worker’s contribution to the end product is diminished.

To make the situation worse, the top manager and his self perpetuating board of directors give themselves raises and bonuses for having reduced the cost of making the product which they continue to sell for the same price. So the gap between the incomes and standards of living of the top managers and the workers (or unemployed former workers) widens.

As the “world economy” developed what should have happened is that those new workers performing the same manufacturing processes should have been paid the same as the American worker producing that same product. This would have resulted in the raising of the standard of living of that developing nation and increased demand for American made products … and a sustaining of the growth of the “middle class” standard of living across a broad spectrum of people all around the world.

American senior managers and government leaders could have chosen to export America’s workers’ high standard of living to the rest of the world. Instead, they greedily chose to import the world’s poverty to the American worker while fattening their own pocketbooks.

Roger

The American Standard of Living

Saturday, Mar 23, 2013

For many years attaining the American standard of living has been the goal of most of the other people of the world. For generations millions of people from all over the world have come to American to give their families the benefits of our standard of living.

But that scene will be changing in the future. We are now suffering a decline in the American standard of living. We are being told that American wages cannot remain where they have historically been because of the “world economy” in which we must now “compete” for jobs. If that is so, jobs will continue to drain out of America until our wages … and our standard of living … has fallen to the level equal to that of the rest of the world.

Furthermore we are told that the current recession in our economy will experience a jobless recovery. We shouldn’t expect a rise in the available jobs for the American worker until our standard of living gets down to the level of the third world workers. At least then we won’t have to worry about illegal immigrants pouring into our country taking our jobs away!

Roger