Viewpoint -- Productivity In Question

Dec. 21, 2004
Manufacturing's managers need to seek serious answers.

Will U.S. productivity re-accelerate as soon as GDP gets going again? Conventional wisdom, economists, and trade groups such as the Washington-based National Assn. of Manufacturers (NAM) contend that it will. "We have the best workers and technology in the world, and the factors that drove the productivity boom of the late-1990s are still in place," states Jerry J. Jasinowski, NAM's president. And yet a return to stellar performances from U.S. productivity isn't a given, in part because the speed and strength of the U.S. economy's recovery from a severe downturn remain in question. What's more, there's the undismissable fact that U.S. productivity gains for the five years between 1996 and 2000 decidedly were not as stellar as originally reported. For the non-farm business sector of the economy, a category that includes manufacturing, productivity advanced at an annual average of 2.5%, not the 2.8% rate previously reported, reveal revised U.S. Labor Dept. data released in August. For the year 2000, the downward revision was even more dramatic, with productivity actually growing at a still-healthy 3% rate, not the spectacular 4.3% pace initially calculated. A recent article in the Wall Street Journal suggests that that these revisions may mean the long-term, non-inflationary U.S. growth rate is in the 3% to 3.5% range rather than between 3.5% to 4%, as many economists now believe. In any event, the numbers should raise questions among business economists and manufacturing executives -- as well as among the securities analysts who track a globe full of goods producers. They should be questioning the extent to which IT generally and the Internet in particular have affected -- and continue to affect -- efficiency. Do the revised numbers challenge the notion of a post-1980s U.S. economy distinctly different from the pre-1990s U.S. economy, the "Old Economy" and "New Economy" paradigm? Or alternatively do the numbers give more credence to the idea of technology-driven economic evolution and less significance to the notion of a technology-engineered economic revolution? In answering those questions, manufacturing's managers need to keep in mind that productivity is more than a simple measure of the relationship between the volume of goods and services and the time workers take to produce them. Productivity also is a product of technological changes, levels of capital investment, prices and types of energy, kinds of materials -- and a product of management skills and the workers' attitudes. For executives keen on improving productivity during the developing economic recovery, U.S. worker attitudes should be their primary cause for concern. Only 47% of manufacturing employees would recommend their company as a good place to work, reveal selected data from a national workplace study done this year by Walker Information Inc., Indianapolis. Only 41% of manufacturing workers believe they are getting the resources necessary to do their jobs. And just 31% of manufacturing workers think excellence is rewarded in their companies. Significantly, the full study -- which in addition to workers in manufacturing and other businesses includes employees of non-profit groups and government-shows that measures of employee loyalty and commitment have not changed notably in the two years since another Walker Information study demonstrated "a clear need" for companies to improve relationships with their employees. Whether or not recent U.S. productivity gains are miraculous and whether or not some people are being silly are not the issues. The critical issue is whether or not manufacturing executives will take seriously the need to improve relationships with their employees -- and, particularly in the wake of Sept. 11th's awful reminder of the worth of individuals, not regard employees simply as productivity statistics. John S. McClenahen is an IW senior editor. He is based in Washington.

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