Some Thoughts on Productivity Surge and Labor Glut amid Economic Downturn

In the midst of economic downturn, we see a surge in productivity since firms are generating good output with fewer workers. Many companies are also adopting the new pay band system which results in lower incomes for the same work. Meanwhile, people over 40 are being let go with their duties being handed to the younger ones who don’t get a raise. Moreover, global wage arbitrage would seem to persist.

The economic downturn the world has experienced may boil down to job creation. That may be the only thing that matters at this point. Instead we see job losses but a surge in productivity.

The U.S experience teaches us a lot. By the mid 1940, the U.S. did have the solid manufacturing base while other countries suffer in the aftermath of WWII. America manufactured top quality electronics, airplanes, cars and food and exported them to the world, providing enough jobs to go around. What has happened since then? Outsourcing manufacturing jobs to China in exchange for massive borrowing from it has generated not only the destruction of the industrial base but a debt culture.

Perhaps this economic debacle points to the importance of working in production of essentials in a self-sufficient way without outsourcing manufacturing to other global locations. Further, we have to recognize the fact that with technology advancing, there would be even less labor intensive world. The labor glut is a worldwide thing.

While we agree with the basic idea that a country has to base its economy around jobs, the challenge lies in how to come up with a real driver for real jobs. This may require a shift in their economic models both for the export-driven and consumption-driven economies. This may also require the elimination of fantasy jobs derived from fake wealth. Public policy does indeed matter if it serves the people’s interests. Corporations may have to reflect on where their profits mostly go to? In the meantime, people may have to change their perspectives on life and accept a much simpler life style.