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Archive for August 28th, 2009

Rick Wolff on wages, productivity, capactiy utilization, and capitalist exploitation:

Two particular sets of August economic data reveal the deepening economic divide behind the “recovery” talk.

The first set of numbers came from the US Department of Labor’s Bureau of Labor Statistics.  They showed some remarkable facts about (1) US workers’ productivity — the physical quantity of goods and services produced per employed worker, (2) the compensation paid to US workers, and (3) the hours they actually worked.  These numbers showed how the economy had changed from the first quarter (January-March) to the second (April-June) of 2009.  The average number of paid hours worked per employee fell by 7.6 per cent, but the total output fell only 1.7 per cent.  That was because the workers who had not (yet) lost their jobs were fearful, so they worked harder and faster doing some of the jobs previously done by laid-off workers.  With fewer employed workers doing more, the BLS reported a gain of 6.4 per cent in the productivity of US labor.

For their harder, faster, and thus 6.4 per cent more productive labor, those still employed saw their money wages rise by only 0.2 percent from the first to the second quarter of 2009.  When the BLS took into account the rising prices workers had to pay, their real wages (the goods and services they could actually buy) fell by 1.1 per cent.  Taken together, these numbers show that employers got a huge increase in output from each employee, while what they paid to their employees imposed on them a decrease in the goods and services they could afford.

No wonder the second quarter of 2009 was celebrated as a “recovery” by business and thus politicians and the media; the workers only watched and worried.

Yet the productivity numbers tell us more.  They show a widening of the inequality between employers and employees in the US…

Employers’ responses to the current economic crisis (lay-offs and speed-up) thus worsen the gap in incomes and standards of living between employers and employees…

Rising inequality in the distribution of income between employers and employees usually widens political and cultural inequalities, too…

Rising inequality also threatens any “economic recovery” that might actually begin.  This is because employers generally save more and spend less of their incomes than their employees do…

The second set of numbers was collected and published by the US Federal Reserve; that set concerns “capacity utilization.” Roughly, these numbers measure the proportion of the nation’s capacity to produce that is actually being used for production.  In July 2009, the US capacity utilization proportion in all manufacturing was 65.4, or roughly two thirds.  Over one third of the tools, machines, equipment, factory and office space, etc. in manufacturing was idle…

Consider the meaning of this waste.  Side by side with today’s 15 million unemployed people (not to speak of the underemployed), we have one third of our industrial capacity unemployed as well…

The vast majority of people live and work (or don’t) in that “other” national economy not experiencing the “recovery” we are supposed to applaud.

None of these points are particularly unique to a Marxian critique, but they can certainly be cast that way. I’m pretty sure I’ve seen a similar argument on Krugman’s blog (though I can’t find the link). Nevertheless, Wolff’s conclusions from these points will undoubtedly be drastically different from Krugman’s.

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