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Productivity Matters

by Elaine Schwartz    •    Jan 3, 2011    •    266 Views

Sometimes new technology increases productivity.

“Sushi making robots” at Kura, a restaurant chain in Japan, have replaced chefs while conveyer belts take the food to diners. By using less labor and more capital, in a tough economy, the firm is profitable.

In 1913, Henry Ford decided to “take ‘the work to the man’ instead of ‘the man to the work'” with a moving assembly line. Implemented during October, by December, average Model T labor time for assembling the chassis decreased from 12 hours 28 minutes to 2 hours and 38 minutes (Chandler, p. 26).  

Sometimes, though, attempts to be more efficient just do not work out.

Hoping to save $3 million annually, Toledo, Ohio tried to implement a high-tech garbage system. Automating the pick-up with pincer equipped trucks, the new system, as described by one resident, doesn’t “…take all the garbage, they drop it everywhere, and you have to clean it up…”

The Economic Lesson

Defined as more output per labor hour, productivity results from more inputs (land, labor and/or capital), better inputs, and/or a more effective combination of inputs.

You can see why productivity matters. As described in a Teaching Company Lecture by Dr. Robert Whapples (#4), greater productivity fuels economic growth. After recessions, typically, productivity increases because output is not entirely offset by lay-offs. Recent U.S. productivity, at an average annual rate of 6.2%, surged during 2009. During 2010, though, it slowed and even contracted for one quarter.

 

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