US breaks five-year stall in productivity, but will change last?
Each worker at one automobile engine plant near Detroit now can turn out almost 40 percent more motors per shift than he or she could just four years ago.
The gains came from using more sophisticated machinery and from actively seeking employee suggestions for improving efficiency, says the plant manager. He adds that he has near-term plans to boost productivity another 55 percent.
Across the United States economy, productivity - the amount of goods a worker can produce in an hour - is rising. For the economy as a whole, productivity grew 3.1 percent in 1983, after being essentially flat over the preceding five years.
''The dismal productivity performance of recent years is behind us,'' argues Citibank economist Paul Groncki in a recent issue of the bank's Economic Week newsletter.
Productivity usually rebounds as the economy recovers because workers and machines can be used more efficiently when plants are operating close to normal levels.
But some analysts also see more fundamental forces at work.
''The evidence - quantitative and qualitative - suggests something more than cyclical forces are at work in important areas of the economy,'' Federal Reserve Board Chairman Paul A. Volcker told the House Banking Committee last week. ''Management and labor alike have turned their efforts and their imagination toward ways to increase efficiency and to curtail overhead.''
A significant long-term boost in the US productivity growth rate would have a major impact on every citizen's economic well-being. When companies turn out more goods with the same amount of labor, profits rise. By increasing the size of the economic pie to be divided, workers can get wage increases without boosting inflation.
Improved productivity also makes US firms more competitive in world markets. And to pay for the money the US is borrowing to finance its budget deficits, US sales abroad will have to increase sharply in the years ahead, experts say.
Although the rate of growth in US productivity lagged the gains posted by major international competitors like Japan and West Germany during the 1970s and early '80s, the absolute level of US productivity is still the world's highest.
Analysts cite several factors that may help boost US productivity growth in coming years. These include:
Fewer young workers entering the labor force. These workers tend to be relatively less productive because they lack experience. The Bureau of Labor Statistics estimates that between 1982 and 1990, the portion of the labor force aged 16 to 24 will to decline 1.3 percent a year. In the 1970's, that portion of the labor force grew by 2.7 percent annually. Meanwhile, the young people who joined the labor force in the '60's and '70's are gaining experience and becoming more productive.
A change in workers' and managers' attitudes. Both groups now ''recognize productivity is important,'' says Citibank vice-president Alan Murray. ''Workers feel a little less secure and more committed to making a business work. And managers are quite concerned about addressing excess labor costs.''
Increased spending for research and development. Total spending on R&D now has hit about 2.6 percent of the nation's gross national product. Estimates suggest that such spending ''could add significantly to the trend rate of growth of output and productivity,'' according to Rudolph G. Penner, director of the Congressional Budget Office (CBO), in his report to Congress last week on the state of the economy. At the same time, a large amount of business investment recently ''has been in labor-saving or productivity-enhancing investment,'' says Donald Straszheim, vice-president of Wharton Econometrics, a forecasting firm.
Stable energy prices. A reduction in oil prices since 1980 and the prospect of greater stability in energy prices in the future ''should mean that any slowing of productivity growth due to energy price changes will diminish and may be reversed,'' the CBO says.
Of course, continued growth in productivity is not assured. There are some disturbing signs on the horizon.
The rate of productivity growth slowed significantly in the final three months of 1983 as larger numbers of workers were rehired.
These employment gains ''have been so large, relative to output growth, that they raise some questions about whether rapid productivity growth is being maintained,'' Mr. Volcker cautions.
The longer-term pattern of productivity growth will not be clear for several years, economists caution.