Productivity and the Defeat of the American Employee

Productivity as a Relentless Attack on the Value of Labor

The standard economist explanation for the relative variation in the increase in income between the top 20% and the remaining 4 groups in the CBO report- "Income Changes in Low Income Households With Children"- from 1991-2005, is "that productivity gains throughout the years resulted from a fundamental reconfiguration of the american workplace and along with the strong economy of the mid 1990's allowed firms to capture increased profits." Let's look at "productivity".

Productivity expresses the relationship between a standard unit of economic output, and the input unit's or cost over a period of time needed to produce it. It often is expressed as labor productivity, which is measured by output over a year and the numbers needed to produce it. An employee can increase productivity by getting better at a job skill, which increases the number of units produced in the same time, detailed famously by Adam Smith in the Wealth of Nations- On the Division of Labor. He can use a tool which makes his work easier, again enabling him to produce more in the same time. An Owner can use a machine to replace human labor, making many more things in the same time. An owner can combine the use of machines and a more efficient process and skill, such as Henry Ford did with the advent of the assembly line. (now Michael Dell and Jeff Bezos). He can get a newer machine that outperforms the old one, and he can get others to do the same job for less. He can use a new mathematical formula to put more planes safely in the air, his research and development department can come up with better performing devices for the same or less cost, giving him market advantage.

Productivity, because it contains labor cost in the equation, is the mathematical formula that expresses a business owner's desire to pay less and less for labor. It expresses the business owner's fight against the value of labor as a principle, that business owners compete against their own labor (employees) whenever practical. Thomas Friedman states in "The World is Flat" that the driving force of globalization is that companies relentlessly pursue to cut costs- which sounds to me like a different sentence stating the same thing. (That's why there is a Giant hole in his argument in "The World Is Flat" concerning India and East Asian development from Globalization. It doesn´t matter one iota if the Indians at these jobs are trying to raise themselves and their salaries, because of the relentless pursuit to cut costs, corporate management will never allow the raising of salaries. "Love them and leave them later for something cheaper"- that's the globalization motto. Mexico IS the model for Globalization as Flint was the model for closing a factory in Michigan and moving one to Mexico.)

Let's look at 5 examples of "Productivity Gains" for American companies, managers and workers:

1) Firms achieved productivity by moving factories from the U.S. to countries like Mexico, Indonesia and elsewhere where they pay the workers much less, then brought the products back to the U.S.. This was done expressly to eliminate U.S. workers, pay the foreign workers much less, and keep the difference for their companies and their bonuses. So the company and it's owner- or owners- were in competition with the EMPLOYEES for payroll resources. This was seen as "Productivity Gains" and was the beginning of what we now know as Globalization.

2) The development of information technology as a tool for productivity began when the personal computer and software combined in the efficient generation and storage of documents. This mechanized the human intelligences of memory and organization, and went far beyond the human limits and accuracy of memory and human intelligence, because it was faster, always (for the most part) complete and accurate, contained far more information storage capacity than the human brain, and could be shared by others, rather than limited to the clerk's memory. So business owners used it as an extension of memory, the organization of files, the generation of documents, and the minimization of storage, all at the click of a mouse. The first productivity gains after some time came from the reduction in the number of people in the firm needed to maintain the firms files, and the increase in space that could be used for income producing activity. The owner fired the employee because he was in competition with the employee for payroll resources, and kept the difference for himself. The was also seen as "Productivity Gains".

3) Office software enabled the generation (by today's standards, of rudimentary spreadsheet reports) that could be done because it was so much faster to put them together, and businesses used these for crude analysis of business data. The development of the internet led to instantaneous transmission of information in the form of electronic files, that were delivered over phone lines. This enabled better inventory control, and the tracking of costs. These were also "Productivity Gains".

4) Once the "triple convergence" of the "ten flatteners" occurred, as depicted in Friedman's "The World is Flat", and firms discovered they had an opportunity once again to fire U.S. workers- they did. They gave these jobs to foreign workers in East Asia for a much lower amount, have them perform it there and transmit it over phone and data lines, and keep the money difference for themselves. They gave it the economic name- OUTSOURCING. Once again the owners were in competition with Employees for payroll resources.

5) Simultaneously, illegal immigrants from Mexico and other countries in Latin America, moved to the U.S. in huge numbers, and again American Workers were replaced, and illegal immigrants given jobs illegally (i.e. with NO RESPECT FOR THE LAW) at lower wages by business owners, who again kept the difference. This is allowed because once again owners are again in competition with employees for payroll resources.

The Defeat of Manager and Employee Intelligence, and the Devaluation of the American Worker- The Two Americas We Now Face
f)... One particular aspect of the development and utilization of information technology has been disastrous for the economic well being of almost all the ordinary employees and unit level to middle-managers of medium and large private companies in the United States. This was not planned by Microsoft or Intel, but was a product of the law of unintended consequences. Here is why. As stated earlier the development of the pc and office software mechanized and expanded functions of human intelligence- memory, organization, and intelligence and put these functions into a machine to be used at a business or home. Once the internet began to develop, business experts from various industries saw a huge niche Microsoft was not filling, which was to form companies to provide software, online, and on-location professional business management and organizational services to medium to large private local businesses for the owners and upper management. They wanted to systemize; or in some cases manage themselves; the operations of these businesses at a reasonable cost at the highest professional level in each industry. Information and expertise at the top level that was in the past only available to fortune 500 companies and their MBA's; or through business books; was now available as functions to medium to large business owners and upper management at the click of a mouse.

Systemization occurred at every level of operations, from human resource functions at the unit level employee handbooks detailing general company procedures, department handbooks that detailed job descriptions, and departmental procedures, to inventory control, operational opening, closing procedures checklists, sales process details, point of sale processes, payroll management, project management, to today's most up to date integrated customer relationship management (CRM) programs- which include automated time management schedules and contact letter generation. It brought ground level accountability and standardized manager and employee performance to the level of the operations director who could now monitor through detailed and accurate spreadsheets and reports- rather than through the conduit of the district manager or unit manager- the operations of the units. All the managers and employees had to do was to follow their operational check lists and practice, input the data, and execute.

What this industry expert utilization of the internet did, along with the advancements of the pc and office software, was to combine to bring the intelligence and organizational experience of industry leading experts, and make it a digital proprietary product and service the business could own and use. The expertise resided in the businesses ability to purchase, rather than in the skill and experience in the brain of a manager or employee that needed to develop, or had developed, over time. Few of the old employees had skills, knowledge, and experience comparable with these professionals, and so most business ideas provided by these employees to upper management and ownership were then seen as antiquated and amateurish to the skill, knowledge and organization provided by the experts. These educated and accomplished experts were competing nationally for the Business's account and dollars by competing against The Business' mangers AND employees locally. It was Ivy League, Big Ten, and Fortune 500, with years of trained experience, against local high school graduates and others with some college.

So what this accomplished was to greatly diminish or abolish; in the eyes of upper management and ownership of the firm, in comparison to the experts; any level and appearance of usefull intelligence that could be provided by the employee to the operation and success of the firm, other than simple execution of checklists. It therefore greatly diminished the relative value of the labor skill of the employee to the firm, as a much greater level and extent of expertise now was proprietary to the company, and in the control of upper management and ownership. Employees are now seen as less intelligent, and less valuable to the strategic and day to day operation of the business than they were before, as all knowledge, experience, and expertise can easily be passed on to new employees through electronic files, or through retraining sessions provided by the providers of the service. That is why companies justify the restriction of the growth of- and incrementally cut pay plans, salaries, and what hourly wages they could. I heard one implementation consultant "joke" once to another manager, "you know the 'KISS' method, keep-it-simple-stupid, well you're the stupid part of it." It makes every business an automated factory. Owners and upper management used these services and information, not only to compete against their market competitors, but once again to compete against their employees for payroll resources and to devalue employed labor. This is a never discussed component of the true meaning of the phrase used by Economists- "Fundamental reconfiguration of the American Workplace". It wasn't just a reconfiguration of the machines we use and how we use them, and the reconfiguration of business supplier relationships, but also a fundamental expansion for owners of the access to, and management of, the knowledge and execution of workplace tasks. As a result of more knowledge and control in owners hands, this made obselete, in the minds of owners, the value of intelligent contribution that could be provided by the employee to the success of the business.

This is the reason that Wal-Mart pays so little, because all functions are seen as rote functions, and not the product of an intelligent contribution- at least not in comparison to that of upper management and ownership. Employed Labor is seen as limited to the rote execution of the function of proprietary assests of intelligence owned by the company. This is why businesses all over the country feel justified in cutting the payment of health insurance and 401k's for employees.

This has happened and has been happening to employees and management in most all retail businesses, including restaurants, car dealerships, real estate agencies, and even to doctors. Insurance companies were able to build computer models from the data derived from the exam of the doctor, that restrict payment of care based on the information provided. Insurance companies in effect used information technology to become medical experts and decision makers in order to control what care the patient is to receive. This for them makes family practicioners more like survey takers of the initial information, than primary care givers, and this is why Doctor's salaries have been under attack and diminishing, because medical expertise is no longer proprietary to Doctors. This is what is called a "Productivity Gain".

It means nothing to them that actual excellence in execution by managers and employees takes skill, talent, intelligence, and creativity, because the information on how to perform the job for the owner is proprietary, they own it and do not depend on the manager and employee. The manager and employee are not seen as thinkers or planners, but are seen as blind followers that merely execute.

This diminishment and defeat of the intelligence of the American Worker is what provided the stage for Globalization. It wasn't just the technology, but also the justification by owners and upper management, that unit level managers and employees are less intelligent, much less valuable, and thus replaceable, and that their contribution doesn't deserve decent income, health benefits or retirement benefits.

This is the Two Americas We Now Face, one separate and above, and one for the rest.

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