Productivity Increases Not Tracked By Leisure Increases

Great Debates
1

There’s a NY Times article by Tim Kreider currently making the rounds about “The Busy Trap”, in which reference is made to a column by Ted Rall on a basic income guarantee, in which a quotation is taken from Erik Rauch’s personal webpage…

Nevermind that “a[n] MIT study” is a misleading way to refer to this. What I am interested in is the extent to which the quote is true or false, and if false, why it is fallacious. I would of course love it to be true, but reality suggests otherwise. I suspect there’s a significant difference between productivity, as measured by per capita GDP increases (inflation-adjusted by some standard bundle of goods not consisting entirely of “leisure time”), and productivity as it might instead be measured via achievable quality-of-life to labor ratios, but I don’t know how to disabuse my mind of the emotional reaction “Why HASN’T free time risen more significantly alongside incredible productivity advances? I want my leisure economy now, goddammit!”.

Can someone with a better grasp on economic issues help me out?

2

I see no one has responded to your post, thought provoking as it is. I think the post with the phrase “Put down the rotten fruit” is covering some of the same ground you are, from a different angle.

3

What caused the productivity increase?

Suppose I own a factory that employs 100 people. If I automate that factory so that it produces the same amount of goods, but only employs 10 people, what happens to worker productivity? Are those 10 people working 10x as hard in order to produce the goods? Are they somehow entitled to more leisure time because I automated the factory?

4

I don’t know; you’re the one constructing the story. You tell me how the automation worked. Probably, though, no, those 10 people are not working 10x as hard; the ratio between their old effort and their new effort, multiplied by the tenfold decrease in number of workers, is, in some sense, the factor by which their productivity increased. (That is, as measured in production per labor)

Or do you mean to suggest that the productivity increase referred to in the OP is, in fact, largely due to people working harder? (Less drinks at lunch, perhaps…)

5

I don’t know. I offered one possible scenario. I think it’s incumbent on the OP to tell us what he thinks, and why he thinks that “a worker should be able to earn the same standard of living as a 1950 worker in only 11 hours a week”.

What did the worker do to rate that compensation? Give us the details of how productivity is measured, and how the worker should be paid. Is there some intrinsic value that a worker has independent of what people are willing to pay him for services rendered?

6

Oh, ok. No, of course I don’t think there is some intrinsic value that a worker has independent of what people are willing to pay him or her for services rendered. [Well, I mean, they have human value, but not wage-wise…]. And of course I don’t think a worker is able to earn the same standard of living as a 1950 worker in only 11 hours a week; this is clearly not what has happened.

But, for example, in your story, supposing the price of goods was equal to the marginal cost of production, which was dominated by the cost of labor involved in production, which has diminished to 10% of its previous value as workers are given the same wage but fewer worker-hours are required. Then those workers who are employed make the same wage, but can purchase 10 times as many goods. Which means they could choose to each work only 10% of the hours they previously did, at equal hourly wage (with the 90 laid-off workers rehired at 10% time as well, to make up the difference) to produce the same number of goods at the same total and improved marginal costs of labor (and thus, same improved consumer price). At which point each worker will be earning enough to purchase the same amount of goods as they could before, but with 10% of the work-hours.

7

There are increasing returns to scale. Cut labor input by three-quarters, and you’re going to be cutting production output by more than three-quarters, especially since our current stock of industrial equipment is built for a workforce of roughly the current size. But even if we can gradually change, shifting our capital goods slowly to correspond to the leisure-loving labor force, we should still expect a bigger drop in output than in input.

Specialization is powerful.

It’s easy to see why. Adam Smith pin factory stuff, which also works for Human Resources. Which is more efficient? To find and hire and train a single competent person who works a good 40 hours a week contributing to the bottom line? Or to find three or four different people, hire three or four different people, train three or four different people, and hope the collective effort of three or four different people somehow meshes nicely to add up to the same output level? Even though labor productivity is higher now, that doesn’t mean that specialization is no longer important. The people still need to learn their jobs, focus on doing just a few things well, and it’s just not as efficient to train a person to work for 20 hours a week, when we could give the same training to a person working 40 hours a week, or more. So, even if we could reliably state that we make four times as much “stuff” for every hour of work – with that stuff objectively defined in a fair way (see below) – we’re still left with less than one quarter the output if we have one quarter the hours worked.

This is just a wild-ass guess, but I imagine we could maintain 1950s-ish material wealth with half the working hours, maybe a little less. But that would require both huge changes in our manufacturing and a huge restructuring of our society, for example, a nice chunk of that extra “leisure” time would be spent taking personal care of our old folks, instead of hiring other people to do it, as so many Americans do now. It could count in the official numbers as leisure because it’s not work for wages, but that doesn’t necessarily mean more beach trips.

And this is assuming that the calculation of inflation over time is even reliable. It’s difficult to know what 1950s-ish prosperity would look like in the modern world. We have these graphs that link these inflation rates over time, but the past and the present are not really like things, to be compared so objectively. They had less stuff in the past, yes. But another big part of the change over time is the kinds of goods that are bought and sold, e.g. PCs, smartphones, video games. These new goods, and the increased manufacturing output of older goods, are an increase in wealth which is extraordinarily hard to measure with hard numbers over long time periods. These brand new inventions, too, take a lot of effort to produce, requiring a lot of specialization, and that means people working more than we technically “have to” work. We like our stuff, and we work for it.

To compound that calculation problem, there is, interestingly, other stuff that is harder to make. Much much harder to make. Construction costs are on a different planet.

This church originally cost $513,000 in 1928. Its replacement cost, as you can see in the caption, was calculated at $425 million in 1976, and I don’t know what it would be today. If you check an inflation calculator over that time period, you see that 513k in 1928 could be measured anywhere from a purchasing power equivalent of 1.7 million in 1976 from a price index, or if we stretch to broader definitions, maybe up to 10 million dollars. (This stuff is messy.) The replacement value of the church could be seen as being up to 200 times the inflation adjusted value of the original construction cost. If you are personally a fan of buildings like these, to the exclusion of modern gadgetry and safety devices like air bags, then you wouldn’t be quite as happy with where this productivity trend has been going the last hundred years. We have plasma-screen televisions and automobile safety cages, but less awesome buildings because we simply can’t afford so many of those kinds of buildings any more, given all that other stuff that we like

I’d like to point out, too, that even if we theoretically could pull it off to work, say, 20 hours a week, we almost definitely wouldn’t do it. There’s another funny thing going on. Humans also just like to be better than those around us. We tend to judge our own lives not by objective criteria, but by how well we’re doing compared to our peers. There are psychological advantages to having the nicest unit in the trailer park that can’t be matched by having the smallest mansion in a swanky neighborhood.

It’s possible that I’ve talked a little bit about this sort of mental quirk before.

In short, we could work a little less, like Europe, but I can’t really see us actually going ahead and doing any drastic cuts in working hours, both because of some legitimate economic reasons and also because we as people are just kinda built that way. We as individuals have some hope of thinking rationally about this stuff, but we as a species will continue on for the time being, until some more fundamental change comes about.

8

Is this implying a 44-hour standard week?

9

The author of that article says “if productivity means anything at all”.

From wikipdedia:

“Productivity is a ratio of production output to what is required to produce it (inputs). The measure of productivity is defined as a total output per one unit of a total input.”

So, yeah, worker productivity means something, but not what the author seems to think.

Wages are not necessarily determined by productivity. Wages are determined by how much the market values the labor of the person earning the wage. The author makes the fallacious assumption that wages should scale with productivity. But it’s pretty easy to understand what that needn’t be so. Let’s look at a more concrete example than I the hypothetical I gave above:

Banks used to have a lot more tellers in 1950. Since then, much of what a teller would do is now done by an ATM. Banks need many fewer tellers today than they did in 1950 to do the same amount of business. Did the skill level of the teller increase such that it’s harder to find people to do that job today than it was in 1950? If not, then there is no reason to think that a teller’s job should pay more now than it did then.

Well, I shouldn’t say there is “no reason”. There is a reason, but that’s not how the market works. If you want to create a system where pay is not tied to the market, but to worker productivity, then that’s a different proposition. You’ll then have to explain how we compete for jobs with those countries that tie worker pay to the market.

10

Workers are human beings like yourself, John. Now whether that means they are disposable cogs in a machine or beings who should be treated with some respect and consideration beyond the wages they earn depends upon your self-image, I guess.

11

I never said they shouldn’t be treated with respect. But I also don’t see why they should be paid more than what the market values their labor at. That is not to say we, as a society, shouldn’t take care of those who are unable to take care of themselves. But I’m not going to pay a guy $15 /hour if there is someone just as competent who can do just as good a job for $10/hour. I’d go out of business, and then I wouldn’t be paying anyone anything.

12

One factor is that the quality of material life has risen. More than half the population would not be able to afford a 1950’s lifestyle working 11 hours a week, but for those working 40 hours a week, everything is better and/or cheaper – houses, cars, and oh god the technology. So we are not getting more leisure for our productivity – instead, we are getting a better quality of materials.

13

Can someone explain why increases in productivity should lead to proportionate increases in leisure? ( I’ve been using worker pay as a proxy for leisure, but it works out the same.)

It should also be noted that you can’t live a 1950s lifestyle if you, for example, drive a car. Increased safety and pollution standards aren’t what they were in the 1950s, for one thing. Air bags and catalytic converters aren’t free.

14

Social utility? The middle class, not the rich, is the engine of progress in this country. Giving them the leisure time and the means to start new businesses while employed would result in a vast increase in new businesses. Of course, many would just use their free time to play more, which means of course, more goods sold.

ISTM the one percent, fighting desperately to work as few people as possible like mules, is stifling economic growth through their short-sighted policies.

15

While I agree with your point, it’s worth noting that some of this comes down to business norms replacing social norms in those arenas. There was a time when businesses were more likely to sacrifice efficiency and profit for broader social values. There was also a time when workers would organize to collectively ensure a greater piece of the pie at the expense of some of the more talented among them. Some of that was due to a lack of competition and information, but I also think fewer people are willing to make those sacrifices due to a change in ideology.

16

There was? When was that?

(Not ignoring the rest of your post, but I don’t disagree with the other stuff.)

17

Well, I guess that’s why its called a trap.

Higher production, doesn’t mean to more time to do other things. It just means more work done in the same time.
It leads to lower prices wich in turn doesn’t go for increasing the pay of the workers.
Neither does the pay, saved from lay-offs due to automatisation, go to the remaining workers.

In short, workers still have to work the hours set by society. The amount of products or rate of production doesn’t really com into it. Working more and harder won’t lead to more pay.

18

When the threat of socialism was real.

19

Got a cite for that?

20

Is that an honest request?

Well allright.
Phillips, for instance. A prime example of the big boss playing ‘humane employer’. Constructing housing for his employees, sports facilities pension funds etc.

The early 1900’s have plenty of examples. As you probably well know.