crocodile wrote on May 13
th, 2016 at 11:58pm:
Grapples, I see that you do not really understand productivity. That's OK, not so many really do. It is real and labour productivity has been growing steadily for about 200 years.
You will find that productivity is no more than output divided by hours worked. That is, increased production per labour input. It is due entirely to the march of technology. It's easy to visualise. I can make the guy with a shovel more productive by buying him a bulldozer.
I can tell you that labour productivity is due to investment in capital equipment or the tools that the workers use to produce the goods and services that we consume.
Given that labour productivity continues to rise makes your assumption that business has stopped investment quite untrue. In fact with capital productivity falling while labour is growing simply means that each increment of labour productivity is provided by increasing capital cost. Basically, less bang for the buck per investment dollar.
But hang on, labour productivity is growing. Therefore investment is still occurring but with higher financial impositions. That is the reason why wages growth is falling.
Buy yourself a decent macro textbook. It's actually quite interesting.
So now extend your reasoning to incorporate economic factors such as market forces, transport and such, costs of production..... and let us see why there is some argument over the cost of wages here and now....
'investment' does NOT have to increase to incorporate increased labour productivity - all that is required is to establish a datum and then operate on that basis - and the problems begin when the market forces, including all costs of production and distribution, do not permit a profit under the existing approach.
So - UNLESS there is major investment in genuine infrastructure, and not in short term fixes - there is no outcome other than destruction of the organism that generates opportunity for profit for both worker and investor - and thus ALL lose from declining productivity in inappropriate investment.
As an example - if I run a household, and wish to make it more 'productive' - do I invest in passive investments such as insulation (etc), or do I invest in an avenue that will recoup positive revenue for my family and home, such as getting a second job, given that the 'opportunity cost' of each is the same (measure that as you will)?
These are the kinds of decision that 'board members' (other than government ones) face every day....
Now - if I am a 'rich person' with all the avenues to minimise my tax and shuffle it off into other avenues and thus reap the benefit... INCLUDING what I have already mentioned - the ability of the 'business' to offload its running costs that a family does not have... how then do I decide which avenue for investment is the most appropriate to ensure the ongoing prosperity of myself AND those who do the work required to ensure that prospertity?
By playing 'the bottom line' at all times?
What you are arguing for here is a totally controlled economy, based on imposition, and not on free choice and market forces...
This is your dilemna.... without the input and social productivity of the ordinary person = the worker, and the organisation itself, no organisation as a whole can prosper...
The reality is that the prosperity of a company or a nation relies on the prosperity of its people..... and forcing those people to work for lesser conditions is NOT prosperity - it is slavery, and no slave works as well as a willing participant.
Grapples, there are too many points to construct a simple answer. Firstly, you need to get the definition correct. You are determining output in terms of profit. That is not correct. Labour productivity is concerned only with the output of production per unit of labour input. Output of production is not profit, it is the actual goods and services.
Liken it to the guy with the shovel. He may dig a hole a day. With a bob cat he may dig 10 holes a day. His labour productivity has grown by a factor of 10.
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