Editor's Note: Squeezing Productivity Dry

April 1, 2014

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Manufacturing shed 2 million jobs in the recession between December 2007 and June 2009 but has added back only 327,000 in four years since. These are sobering but official numbers from the Labor Department, which tallied just 71,000 manufacturing jobs created last year.

Automation and computerization have carried manufacturing on a post-recession mini-renaissance. Manufacturers note they have gone to automated plant floors to compensate for the skills crisis as much as for efficiency advantages. However, the Labor Department calculated that in 2013, unit labor costs shrunk by 0.9 percent and productivity growth stagnated at 1.8 percent (same as 2012). There also exists a counterview that the labor shortage is not all about the skills gap; the lack of wage increases is another reason. The sub-2 percent growth in average hourly compensation since 2009 and three straight years of declines in manufacturing real wages would support this view.

John Maynard Keynes would describe the situation as a new era of technological unemployment, The Economist suggests. We are entering a disruptive period where manufacturing jobs are being remodeled. But before the fourth Industrial Revolution and a new machine age completely arrive, have manufacturers already reached a point where they cannot squeeze anymore out of the current ratio of automation to labor? The data would indicate so. William Ng, Editor-in-Chief, wng@thomasnet.com.

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