Productivity, Labor Complexity, and Wage Determination Procedures — Peter Cooper

This post concerns an implication of Marx’s treatment of productivity and labor complexity for the appropriateness of alternative processes of wage determination. For simplicity, it is assumed that all activity is productive in Marx’s sense (that is, productive of surplus value) and that conditions are competitive in the Marxian (and classical) sense that investment is free to flow in and out of sectors in search of the highest return. Introducing unproductive labor, including a substantial role for public sector and not-for-profit activity, and non-competitive elements would considerably complicate the analysis. The point of the exercise is to consider the incentive effects of alternative wage-determination procedures, from the perspective of Marx’s theory. It is suggested that Marx’s distinction between abstract and concrete labor implies that centralized wage determination, more than alternative wage-setting approaches, will be conducive to productivity growth....

heteconomist
Productivity, Labor Complexity, and Wage Determination Procedures
Peter Cooper

Bill Mitchell — Puzzle: Has real wages growth outstripped productivity growth or not? – Part 2

Continuation.

Bill Mitchell – billy blog
Puzzle: Has real wages growth outstripped productivity growth or not? – Part 2
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Bill Mitchell — What is the problem with rising dependency ratios in Japan – Part 2?

This is Part 2 of my blog posts on population shifts in Japan. In – What is the problem with rising dependency ratios in Japan – Part 1? (October 28, 2019) – we considered the evolution of dependency ratios in Japan as a precursor to considering the nature of problems that accompany a rising dependency ratio. The purpose is to disabuse the public debate of the idea that rising dependency ratios constitute a fiscal crisis and point to the increasing prospect of fiscal insolvency. That erroneous assertion has been used as one of the justifications for pursuing austerity policies, which damage growth, cause rising unemployment and generally miss the point. The problem with this construction is that the solution adopted by the ‘sound finance’ lobby (austerity) to their ‘non problem’ only serves to exacerbate the real problem. Today, we will consider the productivity challenge that lies at the heart of the issues a nation with a rising dependency ratio will face.

Bill Mitchell – billy blog

What is the problem with rising dependency ratios in Japan – Part 2?
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Sandwichman — "I’m not sure I follow the arithmetic here."

All of the above, of course, is simply the fleshing out of assumptions. We assumeddiminishing productivity in the last hours, we assumed heightened productivity from a shorter working week and we assumed declining marginal utility of goods and services produced. Finally, we assumed a preference for free time over a vanishingly small increment of total income. The point is that each of these assumptions were relatively modest but when combined "add up" to a rather substantial cumulative result.

Econospeak
"I’m not sure I follow the arithmetic here."

Sandwichman

Brian Romanchuk — Productivity And The Cycle

I am resuming work on pondering the business cycle, and just wanted to give some initial comments about the notion of productivity. This article just describes some basic concepts taken from a generic post-Keynesian perspective (plus some of my own views, which may or may not be eccentric). As work progresses on my book, I should address the neo-classical approach, as well as empirical results.

Bond Economics
Productivity And The Cycle
Brian Romanchuk

Sarah Berger — 4-day work week is a success, New Zealand experiment finds

If productivity is plummeting in the workplace, the solution might be simple: Make the work week shorter.

One company did just that by experimenting with a four-day work week. The trial was so successful, management is seeking to make the change permanent....

CNBC
4-day work week is a success, New Zealand experiment finds

Sarah Berger

Joshua Bateman — Why China is spending billions to develop an army of robots to turbocharge its economy

• Chinese President Xi Jinping has called for a robot revolution in manufacturing to boost productivity.
• Wages in China are rising, and it's becoming harder to compete with cheap labor.
• An aging population in China also necessitates automation. The working-age population, people age 15 to 64, could drop to 800 million by 2050 from 998 million today.
• Chinese robotic growth is forecast to exceed 20 percent annually through 2020.

Interesting article to read in full.

China's socialist ideology commits the elite to dealing with inequality in a way that capitalist ideology doesn't. It will be interesting to see how this plays out as it develops. I suspect that China will recognize that it is a demand problem long before the West does.

CNBC — The Edge
Why China is spending billions to develop an army of robots to turbocharge its economy
Joshua Bateman, CNBC contributor

McKinsey Five Fifty — The Coming Boom?

The global economy could be on the cusp of a productivity boom—and big opportunities for companies.

Tidbit:

However, capturing the productivity potential of advanced economies may require a focus on promoting both demand and digital diffusion in addition to more traditional supply-side approaches.

McKinsey Five Fifty — A quick briefing in five—or a fifty-minute deeper dive

The Coming Boom?

IMF Blog — This is the major impact globalization has had on productivity

Knowledge flow.

It is important to note that knowledge is a free good. The arrangement of words in books can be copyrighted, but not the knowledge they convey.

However, the application of knowledge can be limited by making it "proprietary." In the past, many processes have been kept secret. e.g., transmitted in families. In contemporary times, processes for applying knowledge may be fenced in, at least for a time, with intellectual rights to processes such as patents.

The IMF looks at the effect of knowledge flow.

Productivity is affected chiefly by combination of labor power (labor time plus worker's knowledge and skill), managers' knowledge and skill (an aspect of work), and technology (application of knowledge through previous work).

IMF Blog

This is the major impact globalization has had on productivity
Aqib Aslam, Johannes Eugster, Giang Ho, Florence Jaumotte, Carolina Osorio-Buitron, and Roberto Piazza

See also

In a stinging critique of US economic policy, Ms Lagarde said the country could resolve its trade deficit with the world by curbing public spending and increasing revenue.

The Telegraph
US-China trade war risks ‘tearing apart’ world order, IMF chief says

Anna Issac

See also

Washington’s recent trade actions are aimed foursquare at China, not at the EU or other trade partners. However, the aim is not to reduce China exports to the US. The aim is a fundamental opening up of the Chinese economy to the Washington free market liberal reforms that China has steadfastly resisted. In a sense, it is a new version of the Anglo-American Opium Wars of the 1840s using other means to open China. China’s vision of its economic sovereignty is at direct odds with that of Washington. Because of this Xi Jinping is not about to cave in and Trump’s latest threats of escalation risk a major destabilization of the precarious global financial system.

There exist basically two contradictory visions of the Chinese future economy and this is what the Washington attacks are about. One is to force China to open its economy on terms dictated by the West, especially by US multinationals. The second vision is one put in place during the first term of Xi Jinping aiming to transform China’s huge economy into the world’s leading technology nation over the coming seven years, a tall order but one Beijing takes deadly serious. It is also integral to the vision behind Xi Jinping’s Belt Road Initiative.

Washington is determined to push China to adhere to a document it produced in 2013 together with the World Bank during the time Robert Zoellick headed it. The document, China 2030, calls for China to complete radical market reforms. It states, “It is imperative that China … develop a market-based system with sound foundations…while a vigorous private sector plays the more important role of driving growth.” The report, cosigned then by the Chinese Finance Ministry and State Council, further declared that “China’s strategy toward the world will need to be governed by a few key principles: open markets, fairness and equity, mutually beneficial cooperation, global inclusiveness and sustainable development.”

Referring to the current Washington strategy of imposing import tariffs on billions worth of Chinese products, Michael Pillsbury, a neo-conservative former Trump Transition adviser and China expert told the South China Morning Post, “The endgame is that China complete its deep reforms of its economy as laid out in the joint report,” referring to the World Bank Zoellick China 2030 report....

Washington's playbook is liberalization or else, as in "you are with us or against us." China is not likely to bend.

The stakes in this latest confrontation from Washington are far too high to expect Xi Jinping to back down to US pressure and open its economy according to Washington demands. That would not only jeopardize China’s economic strategy. It would also cause Xi Jinping to seriously lose face, something he is not inclined to do. Headlines in recent Communist Party state media indicate the mood. The lead story in Peoples’ Daily declares, “Bravely unsheathe the sword, have the courage to oppose, stab at the heart of the snake…” It continues, “a trade war will hurt America’s low-income consumers, industrial workers, and farmers…the main supporters of Trump.”...

In effect, Washington and the latest trade salvos are intended to tell China to keep its place in the US-version of a globalized liberal world where the state is not allowed to play any significant role, one where decisive power is held by a multinational corporate elite. Xi Jinping, having just consolidated his position with no restrictions on his term and consolidating his role as no previous Chinese leader since Mao, is not about to revert to what China sees as bowing to foreign pressures on its economic sovereignty.…

Expect more conflict.

An April 3 editorial in the official Beijing Global Times suggests China has no intent to back down or revert to the World Bank agenda. It declares, “Washington wanted to demonstrate its authority to the world, but unfortunately it gambled badly. The entire US elites have overestimated the strength and execution.” The editorial continues, “There is no way for the US to rebuild the hegemony that elites in Washington picture. As globalization and democracy have dented the foundation for that hegemony, the US lacks the strength, will and internal unity needed. In fact, the US has found it difficult to subdue Iran and North Korea, not to mention major countries like China. Washington cannot rule the world as an empire.”...

NEO

Trump China Trade War Has Deeper Agenda

F. William Engdahl

macromon — Karl, The Comeback Kid?

Why do we think the world is about to see the resurrection of the “comrade culture club” over the next ten years? 

Make no mistake; there will be a visceral political reaction to the coming acceleration of labor disrupting technology. We got a little taste of it in the 2016 election.

Just wait until it hits the doctoring, lawyering, and accounting class....

Technology replaced the farmers. Now it is coming for the industrial workers and many types of service workers, too. Soldiers and sailors are also increasingly being replaced by robots and drones and that is set to take off.

What are the new redundant people going to do?

Global Macro Monitor
Karl, The Comeback Kid?
macromon

Peter Cooper — Growth is Good?

Whenever the topic of economic growth is broached, there is a common and understandable reaction along the lines that growth is ecologically unsustainable or socially harmful. Since one of the preoccupations of this blog is demand-led growth, it is perhaps worth pausing to reflect on the appropriateness of the topic. This can be broken down into two parts. Why consider growth as such? And why emphasize the possibility that growth is demand led?...

heteconomist
Growth is Good?
Peter Cooper

Dean Baker — Morning Edition Tells Us That Most Workers Think Like Most Economists and Don't Worry About Automation

Productivity growth (the rate at which technology is displacing workers) had slowed to roughly 1.0 percent annually in the years since 2005. This compares to a 3.0 percent growth rate in the decade from 1995 to 2005 and the long Golden Age from 1947 to 1973. Most economists expect the rate of productivity growth to remain near 1.0 percent as opposed to returning back to something close to its 3.0 percent rate in more prosperous times.… 

It is also worth noting that the high productivity growth in the period from 1947 to 1973 was associated with low unemployment and rapid wage growth. If another productivity upturn instead leads to high unemployment and weak wage growth it will be the result of deliberate policy to shift the benefits of productivity growth to those at the top end of the income distribution (e.g. government granted patent and copyright monopolies, high interest rates by the Fed, and trade policy that protects doctors and other highly paid professionals from competition -- all discussed in Rigged [it's free]). It will not be the fault of the robots.

As usual the issue is distribution, discussion of which most conventional economists take off the table as taboo.

Beat the Press
Morning Edition Tells Us That Most Workers Think Like Most Economists and Don't Worry About Automation
Dean Baker | Co-director of the Center for Economic and Policy Research in Washington, D.C

Michael Roberts — Boom or bust?

Review and critique of the latest OECD World Economic Outlook, from a Marxian POV. Useful.

The key for me, as readers of this blog know, is what is happening to the profitability of capital in the major economies. If profitability is rising, then corporate investment and economic growth will follow – but also vice versa. But if profitability and profits are falling, debt accumulated will become a major burden. Eventually the zombies will start to go bankrupt, spreading across sectors and a slump will ensue. Financial prices will quickly collapse toward the real value of their underlying productive assets.
Indeed, according to Goldman Sachs economists, the prices of financial assets (bonds and stocks) are currently at their highest against actual earnings since 1900!
What the OECD and IMF reports show is that if there is a downturn in profitability, the next slump will be severe, given that private debt (both corporate and household) has not been ‘deleveraged’ in the last nine years – indeed on the contrary.…

Michael Roberts Blog
Boom or bust?
Michael Roberts

Chris Dillow — Notes on productivity

Productivity is a problem and conventional British economists don't have a theory that explains it. So what to do? Oh, right, more blood letting (austerity).

Stumbling and Mumbling
Notes on productivity
Chris Dillow | Investors Chronicle

Bill Mitchell — British productivity slump – all down to George Osborne’s austerity obsession

Apparently, whenever some poor economic news is published about the United Kingdom, journalists have to weave in their on-going gripe about the outpouring of democracy in June last year that saw the Brexit vote to leave successful. Its hysterical really. The most recent example is from the otherwise sensible Aditya Chakrabortty from the UK Guardian (October 17, 2017) – Who’s to blame for Brexit’s fantasy politics? The experts, of course. The story has nothing much to do with the June 2016 Referendum but more about massive forecasting failures of the Office of Budget Responsibility. But somehow the story opines about the lies told about Brexit and a fiscal “bloodbath” – the latter being the description for the fact that the fiscal deficit is likely to increase a little as a result of a slower than expected economic growth outcome.

The UK Guardian continually writes about these two obsessions – the first that Brexit will be a disaster and the second that the fiscal position of the British government is in jeopardy and will undermine the capacity of the government to defend the economy if a major downturn comes along (as a result of the ‘Brexit disaster’). The narratives are interlinked – Brexit is bad, it will cause deficits to rise which are bad, and the government will be powerless as a result of the rising deficits to stop the bad consequences of Brexit – which is a big bad. All propositions are largely nonsense.

Brexit will be bad if the British government continues to implement neoliberal policy. Rising deficits do not alter the spending capacity of government. And as a currency-issuing government, Britain can always arrest a recession, if there is political will. The fact is that the OBR forecast errors are just part of the neoliberal lie. And the productivity growth slump the OBR has now ‘discovered’ predates the Brexit referendum by years and is all down to the misplaced austerity imposed by George Osborne in June 2010. But it is disappointing to read this sort of stuff being repeated by so-called progressive commentator. There is clearly more work to be done via education.

Paragraphing added.

Bill Mitchell – billy blog
British productivity slump – all down to George Osborne’s austerity obsession
Bill Mitchell | Professor in Economics and Director of the Centre of Full Employment and Equity (CofFEE), at University of Newcastle, NSW, Australia

Will Denayer—The productivity puzzle explained. How right wing policies and neoclassical recipes destroy economic growth

‘America needs its unions more than ever.’ And ‘Labour reform could help restore the bargaining power of US workers.’ Can you believe that these are titles from articles in the Financial Times? 

Mario Draghi, the president of the ECB, recently boasted that since 2015 the euro-zone gained more than 5 million jobs. New cheap jobs yes, and productivity remains historically low. Today’s lacking investment means that technology does not substitute for labour – the normal trajectory in capitalism, instead cheap labour substitute for technology. As a result, productivity stalls and, with it, progress. Britain and the US, with their deregulated labour markets, constitute the best examples of this degenerative trend. Britain’s flat productivity reflects a combination of rapid automation in some sectors and the rapid growth of low-productivity, low-wage jobs. In the United States, eight of the tenfastest-growing job categories are low-wage services such as personal care and home health aides (see here).

The political consequences of this situation cannot be underestimated. After decades of right-wing policies, stripping away protections for workers, the flexibilisation of labour markets, destroying ‘government rigidities’ and waging wars against trade unions, it turns out that these neoclassical recipes decrease productivity.

The problem does seem to be immigrants taking jobs from native workers, as many believe. but rather exporting productive capital to take advantage of lower costs abroad, coupled with neoliberal labor policy that skews the domestic labor market toward capital by reducing the bargaining power of labor. This means that domestic workers are competing with lower cost embedded labor. A result is increasing economic inequality and lagging domestic demand as workers' income remains stagnant or shrinks.

This model is not working for workers (most people) of the developed world, although the emerging world is benefitting, which is different from the classical model of imperial-colonial capitalism in which productive capital investment and technological innovation were chiefly domestic.

Flassbeck Economics International
The productivity puzzle explained. How right wing policies and neoclassical recipes destroy economic growth

Will Denayer

Xinhua — China on rapid progress of robotization: study

China bought 90,000 robots in 2016, accounting for almost a third of the global total, and the robot revolution may raise China's economic competitiveness, according to a report released this week by Bloomberg Intelligence.

China.org.cn
China on rapid progress of robotization: study

Xinhua

Link Between Low Wages and Low Productivity Growth: High Wages Make Low Productivity Jobs Disappear

Substitution of capital (technology) for labor becomes more profitable as wages rise.

CEPR

Link Between Low Wages and Low Productivity Growth: High Wages Make Low Productivity Jobs Disappear

Dean Baker

Giuseppe Berlingieri, Patrick Blanchenay, Chiara Criscuolo — Great Divergences: The growing dispersion of wages and productivity in OECD countries

Some firms pay well while others don’t; and some are highly productive while many aren’t. This column presents new firm-level data on the increasing dispersion of wages and productivity in both the manufacturing and services sectors in 16 OECD countries. Wage inequalities are growing between firms, even those operating in the same sector – and they are linked to growing differences between high and low productivity firms. Both globalisation and technological progress (notably information and communications technologies) influence these outcomes – as do policies and institutions such as minimum wages, employment protection legislation, unions, and processes of wage-setting....

Vox.eu
Great Divergences: The growing dispersion of wages and productivity in OECD countries
Giuseppe Berlingieri, Patrick Blanchenay, Chiara Criscuolo

Xinhua — China's self-driving truck passes test

A Chinese-made self-driving truck has passed a navigation test, heralding the era of intelligent, automated heavy vehicles.

FAW Jiefang, the leading truck manufacturer, debuted the self-driving truck at FAW Tech Center in Changchun City, Jilin Province. The truck was able to recognize obstacles, slow down, make a detour, and speed up.

The truck reacted correctly to traffic lights, adaptive cruise control, remote commands and successfully overtook, company sources said.

FAW Jiefang now plans to commercialize the intelligent driving vehicle as early as 2018.

Hu Hanjie, FAW Jiefang general manager, said the company has built a whole industry chain partnership to develop, manufacture, sell, and service self-driving trucks. The participation of more firms across the sector will accelerate the technology's use on heavy-duty vehicles, Hu said.

Leading Chinese tech firms, including Baidu and Tencent, have invested in self-driving entities. Baidu, for example, has tested driverless mini cars at the annual World Internet Conference for the last two years.

Industry insiders, however, said the technology may prove more practical when it is used on trucks than private cars as truck drivers are more likely to drive tired. The new systems could cut operational costs by replacing drivers.

Ecns
China's self-driving truck passes test 

Xinhua | Editor: Yao Lan