Is the Productivity of American Workers Overstated?

by Don Boudreaux on March 6, 2010

in Data, Myths and Fallacies, Trade

Quiz time.  Read this op-ed, by Alan Tonelson and Kevin Kearns, that appears in today’s New York Times and explain how the authors’ understanding of productivity is confused – and fatally so for their case for higher tariffs.  (I’ve already sent my answer to the NYT in the form of a letter-to-the-editor.)

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muirgeo March 6, 2010 at 8:50 am

“But there’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.”

WOW! That explains a lot. That’s the question I wanted answered because I had a suspicion the numbers were fishy.

Where do we find your reply? I don’t believe there is a legitimate one.

Colin March 6, 2010 at 8:51 am

As for what’s wrong with the op-ed, raja pretty much nails it. It doesn’t matter if the explanation for my reduced hours worked is a new machine made in China or that some of my tasks were outsourced to a worker in China.

Also, Tonelson keeps talking about stagnating wages, when the better metric is compensation which takes into account benefits. March 6, 2010 at 11:01 am

What measure of wages is stagnant?

real compensation per worker increased about 1.6% per year during the Great Moderation (1984 to 2008.)

Real average hourly wages increased about about .7% per year during the Great Moderation. (This measure dropped a bit between 1984 and 1992, and so maybe that is what people remember.)

Gary Johnson for America 2012

Miles Stevenson March 6, 2010 at 11:41 am

“It’s not cheaper for you if your wages are stagnant or if you do not have a job.”

So, if I lose my job, then all of a sudden there is no difference in price between a $20 stereo from China and a $500 stereo made in America? The imports from China aren’t really cheaper, so, if I lose my job then the financially prudent thing to do would be to buy the $500 stereo because that will save me money? What does stagnant wages or not having a job have to do with the real price of goods? If I lose my job, isn’t it a GOOD thing that I can buy cheaper goods no matter where they were made?

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