Vol. 72/No. 32      August 18, 2008

A July 15 report to Congress from the Federal Reserve’s Board of Governors reported the productivity rise as a silver lining in an otherwise bleak economic outlook. Worker output per hour increased about 3.25 percent from March 2007 to March 2008, compared to 0.5 percent the previous year.

The main source of the rise in productivity is the intensification of labor through faster line speeds and making fewer workers perform the same amount of work through “job combinations,” “downsizing,” and “job restructuring.”

To boost their profit margins, employers have also lowered their costs by pressing down wages, slashing medical benefits and pensions, and lengthening work hours.

Over the last year, average employer payments in wages and salaries increased by 2 percent, not counting for inflation. The previous year this figure rose by 3.5 percent.

According to the Federal Reserve report, employers’ greatest labor cost was in payments to retirement plans as a result of money these funds lost in the stock market, not something workers actually received.

As a result of the productivity increase and low wage and benefit cost, according to the report, unit labor costs rose less than 1 percent, the lowest annual rise in three-and-a-half years. During the previous year, unit labor costs increased by 4.25 percent.

“Broad measures of hourly labor compensation have not kept pace with the rapid increases in both overall consumer prices and labor productivity,” said the Fed’s report. In other words, workers have seen nothing from working harder other than a decline in their real wages.

Between June 2007 and June 2008, the overall Consumer Price Index, which is always understated, rose 5 percent, 3.4 percent in the last four months alone. The previous year it increased by 2.7 percent. For basic necessities, such as food and energy, it’s higher. For example, in the last two years, orange juice rose 34 percent, while gasoline prices rose 33 percent in just the last year.
 
 
Related articles:
Unemployment at highest level in more than 3 years
For sliding scale of hours, wages  
 
 
Front page (for this issue) | Home | Text-version home