Productivity Fairness

Its just about the end of February and while its a bit premature, I feel Spring is almost here. Spring is time for renewal as we see the cycle of nature continue (at least outside the tropics).

Oddly, the Arab world seems to be in the midst of their own renewal, one that doesn't happen every year. Its hard to figure out exactly what the result of all that turmoil will be, but its probably safe to say that it won't result in any new utopias.

Looking around the world we are faced with a dilemna. We have mastered significant technology and can produce goods and services more productively than ever before. This is wonderful news, but it has one major downside. This productivity results in many once productive people becoming, as the British say, redundant.

So as we have improved productivity, the result has been that the benefit has accrued to a smaller number of people and many others find themselves unemployed with no good prospects.

Think about it. In general we produce enough food and have fairly adequate distribution systems. We can't get the food to some people and others simply cannot afford it but the food exists. Similarly for manufactured products, we don't have a shortage. In fact generally we produce too much. Even as some third world countries expand their standards of living, the demand will not requre the employment of all the redundant people.

The only real answer, and one that doens't seem all that likely right now, would be to distribute productivity gains differently, reduce the hours for workers while increasing their hourly wage to compensate. The current distribution goes like this. If a workforce of 100 people has a 10% productivity gain, the company profit increases and 10 people are let go. The 90 remaining people do not directly benefit, except they got to keep their jobs, and likely because of the firings didn't get much in the form of a pay raise. The alternative would be to reduce weekly hours for all by 10% and continue to employ all 100 workers.

Now in this simplistic equation, I have ignored the fact that the competitive marketplace forces some of the gains to be passed along as lower prices, and the reason this tactic is not tenable is that firms who tried it would become non-competitive.

Of course, if all firms operated this way it would level the playing field, but you know someone would undercut the prices.

So how is the world going to employ all the redundant people?