Increased productivity at what cost? Can the productivity of the American worker get any better? The U.S. Labor Department reported in August that nonfarm business productivity of U.S. workers rose 6.8 percent from April to June. This rise was a major increase over the 2.1 percent recorded during the first three months of the year. And it was more than twice the annual average of 2.8 percent from 1996-2002. One-percent gains were the norm during the 1970s and '80s. Gains in productivity are reflected in USA Today's third annual study of year-to-year productivity changes among the country's 100 largest companies. The study found that more companies are operating with fewer workers -- "it now takes only nine workers to produce what 10 did in March 2001." One of the concerns with the productivity increase is the number of jobs that have been lost -- 715,649 during the first six months of the year, according to job placement company Challenger Gray & Christmas. Nine million Americans are out of work. August was the seventh consecutive month of job losses. More than 2.6 million jobs have been lost since President Bush took office in January 2001. USA Today reports that most of the Top 100 companies it studied have raised productivity by eliminating jobs. As productivity has surged, the number of hours worked declined 2.2 percent during the second quarter, the biggest drop in more than a year. One of the biggest shifts in the loss of jobs is the move away from the manufacturing sector to professional jobs, which were previously thought to be untouchable. More office and professional positions, reported USA Today, are being eliminated or outsourced to workers in other countries. Forrester Research projects that during the next 15 years more than 3 million white-collar jobs and more than $130 billion in wages will move outside the United States. The Bush administration said that the economic recovery is gaining momentum and that no additional tax cuts will be needed to create more jobs. The Federal Reserve has left the short-term interest rate at 1 percent and doesn't expect to change it any time soon. The Fed has lowered interest rates 13 times since January 2001. Putting the squeeze on inefficiency Massachusetts Institute of Technology visiting professor Shlomo Maital, who partnered with USA Today in measuring the largest companies' annual productivity improvements (Total Factor Productivity), told the newspaper that Europe is not experiencing the same gains and that the United States is achieving a competitive edge. The newspaper reports these gains are even more impressive at smaller, more flexible companies. Federal Reserve Chairman Alan Greenspan said that the improved productivity over an extended period has been the result of companies eliminating accumulated inefficiencies. Companies have increased productivity by either reducing their workforces, selling off assets such as facilities and equipment or increasing revenues faster than they have added jobs. Major horticultural retailers Wal-Mart (plus 7 percent Total Factor Productivity), Home Depot (minus 6 percent TFP) and Lowe's (plus 1 percent TFP) continue to look for ways to reduce inefficiencies to improve productivity. USA Today reports that Wal-Mart's return on investment had dropped from 9.6 percent in 1998 to 8.5 percent in 2001. In 2002 the world's largest retailer reversed the decline by selling off or leasing 13 million square feet of vacant space. These retailers will continue to work to improve their productivity, which will put pressure on their suppliers to do the same. Greenhouse growers have had their share of productivity gains through investment in more efficient structures, environmental controls and equipment. As the costs of grower inputs (fuel, containers, growing media, fertilizer, plant material, etc.) continue to increase, one has to wonder just how much more productive growers can afford to become and at what cost. Send this article to a friend Enter your e-mail address: Enter your friend's e-mail address: Click the image below to send: © 2002 Branch-Smith Publishing