When Analyst-Pundits Reinvent What Liberals Have Been Saying: The Labor-Productivity Edition

Despite the breathlessness in this Upshot piece, I fail to see how this isn’t anything Dean Baker, Larry Mishel, or any other number of full-bore lefty-liberal types haven’t been saying for years (boldface mine):

It’s a chicken or egg problem: Does low productivity cause slow growth, or does slow growth cause low productivity?

The second possibility is the provocative argument of a new paper published Tuesday by the Roosevelt Institute, a liberal think tank. The paper argues that the United States economy is not actually closing in on its full economic potential and has plenty of room for continued growth — so long as the Federal Reserve doesn’t put on the brakes of the expansion prematurely.

J. W. Mason, the author of the report, argues that soft productivity growth reflects not some unlucky dearth of new innovations, but rather is a consequence of depressed demand for goods and services and a slack labor market that has depressed wages.

Maybe if the labor market were tighter and wages were rising faster, it would induce companies to invest more heavily in new labor-saving innovations

Just maybe, if the labor market tightens and good workers are harder to find — and wages rise — that will be the impetus to get companies to consider more of those big-ticket innovations that generate productivity growth.

Consider a hypothetical (though one that isn’t actually that hypothetical right now). If your neighborhood fast food place employs 10 people during the lunch rush, with each making $10 an hour, what will happen if your state raises its minimum wage to $15?

The owner might raise prices, or accept lower profits, or close the store entirely. Or, just maybe, the owner will invest in new machinery to enable workers to do more with less. Perhaps the restaurant will be able to operate just fine with only five workers after investing in self-ordering kiosks and a hamburger-flipping robot.

There’s a term for a restaurant that can serve the same number of burgers with half as many employees, and it’s higher productivity. (While this can conjure scary notions of a work force made redundant by robots, economists see a more hopeful picture: that higher productivity enables faster economic growth and higher incomes, at the cost of some temporary disruption for the workers affected.)

It’s worth noting that the sort-of-hypothetical example is very ‘New York-centric.’ In many parts of the country, hard physical labor–including manufacturing jobs–pays less than $15/hour.

But to return to the post title, I’m glad this is getting coverage in the NY Times, but this is hardly new. But if erasing the Dirty Hippies gets good policy enacted, I suppose this is a good thing?

Aside: There is a difference between jobs being lost due to automation, and, let’s say, the recent layoffs at Carrier, where the jobs (or some of them anyway) aren’t being replaced by technology, but are being shipped abroad.

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3 Responses to When Analyst-Pundits Reinvent What Liberals Have Been Saying: The Labor-Productivity Edition

  1. JDM says:

    “But if erasing the Dirty Hippies gets good policy enacted, I suppose this is a good thing?”

    It’s better than nothing, but it does preclude future learning. If we just adopt the ideas of someone who is correct without acknowledging them, we get one right idea. If we both adopt the idea and acknowledge the source(s), we gain the future.

    It’s the teach a man to fish thing.

  2. harrync says:

    One thing that caught my eye in this article was the assertion that conservative and liberal views “overlap”. Only in the sense that both think we need more investment. Conservatives say the way to get more investment is to lower taxes. [Though they don’t explain why lower taxes would cause a business to expand output when they already have enough capacity to meet current demand.] Liberals say we need stimulus – monetary and fiscal. And higher wages – increased minimum wage, stronger unions. That is, put more money in the pockets of people who will actually spend it on that increased production. Views differ, but I think the liberals are right.

  3. JW Mason says:

    I rise to defend my honor as a dirty hippie! If anything, I’d say that as a self-described socialist I’m to the left of Dean and Larry.

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