For the last decade, we have been bombarded with stories about how robots were going to take all of our jobs. This claim made little sense since productivity growth, which measures the rate at which technology is displacing labor, was extraordinarily low through this period.
It averaged just 1.3 percent a year from 2005 to 2018. That compares to productivity growth rates of 3 percent in the long Golden Age from 1947 to 1973, and again from 1995 to 2005. If the robots were taking all the jobs, they were doing a good job of hiding the evidence from the Bureau of Labor Statistics, which compiles the data.
But the new data on first quarter productivity released last week tells a different story. Productivity growth rose at a 3.6 percent annual rate in the first quarter and has risen 2.4 percent since the first quarter of 2018. That's a big change.
Before making too much of this jump in productivity, some caution is in order. Productivity data are notoriously erratic. The data are subject to large revisions, and even post revisions we often see sharp reversals quarter to quarter that are not plausible as actual changes in the economy.
For example, productivity reportedly rose at a 3.7 percent annual rate in the third quarter of 2014, and then dropped at a 2.2 percent rate the next quarter. This spurt in productivity, followed by an actual decline, almost certainly did not really happen. These were just quirks in measurement. There is at least a 50 percent probability that the uptick in productivity we see in the data now will be reversed either by revisions, or by sharply lower growth in future quarters.
But for the moment, let's assume it is real. One of the main rationales for the Trump tax cut was that it was supposed to lead to a more rapid pace of productivity growth, which would mean higher wages and thereby benefit most of the population. Needless to say, Trump and his crew will surely be taking credit for this jump in productivity, as soon as someone tells them about it.
The problem with the tax cut story is that we are missing an intermediate step. The tax cut was supposed to increase productivity by producing a boom in investment. There actually has been no notable uptick in investment since the tax cut.
Investment in the first quarter of 2019 was up just 4.8 percent from its year-ago level. That's a very modest uptick, which is pretty much standard growth for the economy during a non-recession period. It would take investment growth on the order of 30 percent to see the sort of uptick in productivity shown in the first quarter data.
There is an alternative story which many progressive economists have long pushed. In a period of low unemployment, employers have more incentive to find ways to use their workers better. If it is difficult to find a new worker, then employers have a good reason to figure out ways to get more out of their existing workforce. This means higher productivity.
Also, in a strong labor market, the lowest-paying and least productive jobs go unfilled. For example, a convenience store might be closed from 1 am to 6 am just because it isn't profitable to have someone work those hours. Eliminating the least productive jobs raises the average level of productivity.
The jump in productivity in the first quarter data is consistent with this tight labor market story of productivity growth. If this really proves to be true, it would be very good news.
First, a more rapid sustained rate of productivity growth would mean that workers could get faster rates of wage increases without leading to inflation. Of course, workers could also get faster wage increases at the expense of profit margins, which soared in the Great Recession, but there is even more room for wage growth with a 2.4 percent rate of productivity growth.
The gains from faster productivity growth can also be taken in shorter work hours. We can follow other wealthy countries in having paid sick days and family leave as well as four to six weeks a year of paid vacation.
Also, faster productivity growth will make it easier to finance a Green New Deal to address global warming. If we maintain a growth rate that is a full percentage point more rapid than the previous pace, it would add more than $2 trillion to annual GDP by 2029. Much of the economy's additional production can be devoted to clean energy and conservation, allowing for more rapid reductions in greenhouse gas emissions.
There will be lots of benefits to the economy and society if the upturn in productivity growth reported for the first quarter turns out to be lasting. Unfortunately, it is most likely just a blip.
By Timothy A. Wise
Cross-posted at Mark Bittman's Heated at Medium.
One version of an old joke features a shipwrecked economist on a deserted island who, when asked by his fellow survivors what expertise he can offer on how they can be rescued, replies, "Assume we have a boat." Economists have a well-deserved reputation for making their theories work only by making unrealistic assumptions about how the real world operates.
I was reminded of the joke often in the five years I traveled the world researching my book, Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food. Policy-makers from Mexico to Malawi, India to Mozambique, routinely advocated large-scale, capital-intensive agricultural projects as the solution to widespread hunger and low agricultural productivity, oblivious to the reality that such initiatives generally displace more farmers than they employ.
Where are the displaced supposed to go? "Assume we have employment," can be the only answer, because economic growth sure wasn't generating enough jobs to absorb those displaced from rural areas. No one can sail home on an economist's assumed boat. And assumed jobs wouldn't address the chronic unemployment and under-employment that characterize most developing countries.
With demographic shifts creating youth bulges, job-creation remains an urgent priority. Indeed, growing populations are often portrayed as a demographic "time bomb," conjuring images of unemployed youth joining gangs, insurgent groups, or just falling into despair in urban slums.
But what if we saw all those unemployed workers as a resource rather than a curse? Economist Michael Lipton and others have long argued that the bulge in working-age youth can be a demographic dividend rather than a demographic time bomb, but only with policies that focus on creating and rewarding work, beginning with labor-intensive farming in agricultural societies. That is exactly what I see starting to happen in Mexico under its new president.
The Demographic Dividend
Lipton makes what should be an obvious point: labor creates wealth. So a society with a large share of able-bodied workers has a vast resource to generate economic development. The economic success stories in South and East Asia relied on an increase in the number of young people entering the workforce to accelerate economic growth. Lipton estimated that about one-third of the widely acclaimed "Asian miracles" of growth and poverty reduction could be attributed to those countries' low dependency ratios — the share of the population (children and older people) who don't work and are therefore dependent on the share of the population who can.
The United States now faces the opposite problem, with baby-boomers collecting their Social Security checks and with fewer workers paying into the government retirement system. But in Africa, low dependency ratios, economically, mean fewer mouths to feed per able-bodied worker. In 2012 there were 120 working-age people for every 100 dependents; in 2050 there are projected to be 196, a 63% rise in workers-per-dependent.
That should be a boon to economic growth, but only if those available workers can be put to productive work. In contemporary Asian success stories, such as China's, the first place they were put to work was in labor-intensive agriculture, with land reforms that created and supported intensive production on small farms of about two acres each.
Sub-Saharan Africa is the ticking demographic time bomb everyone now worries about; populations are expected to double, or more, by 2050. But that could be a demographic dividend if governments pursue policies that put people to work, first in agriculture. The young will be a resource, not a curse. And bottom-up economic development, particularly if it improves the lives of women and girls, will slow population growth, as it has in other developing countries.
Little Support for Labor-Intensive Agriculture
In my research in Africa, I didn't see much evidence that governments saw working-age youth as a resource. And they certainly were not investing in the kind of labor-intensive small-scale farming that was the foundation for Asia's economic miracles. But I saw plenty of examples of farmers taking matters into their own hands and intensifying their own production, generally with scant government support.
Intensification now has a bad name among many sustainable agriculture advocates because the term has become associated with increased use of commercial inputs to raise productivity. Even "sustainable intensification" has been co-opted by advocates of Green Revolution technologies to argue for "sustainable" use of chemicals.
But everywhere I traveled to research Eating Tomorrow, I saw farmers creatively intensifying the farming of their small plots, in truly sustainable ways. Those few who had access to irrigation could essentially double production, growing a second set of crops on the same land by irrigating it in the dry season. Even those who couldn't irrigate raised goats or other small livestock, composted the manure, and applied it to their fields, increasing soil composition, fertility, and productivity. Farmers inter-planted various food crops with their corn, ignoring Green Revolution monocultures and the bribes –- subsidies for commercial corn seeds and chemical fertilizers –- that backed them up.
Farmers knew when they harvested cowpeas from the same fields from which they had recently picked their corn that they had indeed intensified production –- two harvests rather than one –- from their land. Agricultural economists measure yield as corn-per-acre, not total-food-per-acre, so those shipwrecked economists see intercropped fields as less productive than monocultures. But these farmers know better. And when corn crops fail due to drought or pests, they also know they have grown other foods that survive to sustain their families.
Lipton's policy advice is to provide public support so small-scale farmers can intensify production, putting all able-bodied family members to productive work. Organic and ecological agriculture, in fact, require more intensive farm management, more labor. If that labor is rewarded with good prices, it can initiate a virtuous cycle of economic development, taking advantage of the productive resource represented by a large working-age population, turning a potential demographic time bomb into a demographic dividend.
Making Rural Mexico Great Again
Interestingly, I now see such policies being implemented in Mexico, 25 years into the rural disaster that the North American Free Trade Agreement (NAFTA) helped create. The new approach comes from the government of Andrés Manuel López Obrador, who was swept into office last year in a landslide of discontent with Mexico's corrupt leaders and their failure to sustain a decent standard of living for the majority of Mexicans.
In 1994, NAFTA opened the floodgates to cheap, subsidized U.S. corn, wheat, soybeans, and other crops, inundating rural Mexico. Corn imports jumped fivefold, driving local corn prices down by two-thirds. Some five million able-bodied workers fled rural Mexico, and they did not find waiting for them any of the job's NAFTA's economists had assumed would materialize. Some ended up as seasonal laborers on Driscoll's strawberry farms in Northern Mexico. Others swelled city slums. Many risked the increasingly dangerous crossing to seek work in the United States. Most sent money back home so the family could keep its farm, often its only asset.
Today, an embarrassing 57 percent of Mexico's able-bodied workers are in the informal sector, the broad category of off-the-books work ranging from street vending to drug trafficking. That is a higher share than before NAFTA. Clearly, Mexico hadn't put its able-bodied people to productive work to jumpstart economic development.
The new López Obrador administration, however, seems determined to make rural Mexico great again by investing in the productivity of the country's family farmers in the most neglected areas of the country. The leader of his new Office of Food Self-Sufficiency, veteran farm leader Victor Suárez, has ambitious programs underway to reinvigorate rural economies by paying support prices for key food crops –- corn, beans, wheat, rice, and milk –- and using that public procurement to provide high-quality foodstuffs to schools, hospitals, and other public institutions and to the poor. A host of other policies, such as a massive agro-forestry program, aim to invest in soil fertility and sustainable resource use on the country's small farms.
If that approach sounds familiar, it should. It is exactly what the U.S. government did in the Great Depression, and it is part of what won Brazil's "Zero Hunger" campaign international recognition. It is the cornerstone of India's National Food Security Program, which I document in my book.
In Mexico, López Obrador says that the explicit goal is to eliminate the root causes of rural outmigration and illicit drug trafficking. In other words, echoing Lipton, to create dignified work in agriculture to turn Mexico's chronic youth unemployment into a demographic dividend.
Timothy A. Wise directs the Land and Food Rights Program at the Small Planet Institute in Cambridge, Mass. He is the author of the recently released Eating Tomorrow: Agribusiness, Family Farmers, and the Battle for the Future of Food (New Press, 2019), available wherever books are sold.
Proof that teaching is increasingly becoming a profession under siege is mounting.
Many of us have relatives or friends who were dismissed from their schools during the recession or kept their jobs but faced cuts in school funding and other challenges affecting their work lives. News reports are replete with stories of teachers who quit or who are thinking about quitting. And the most recent PDK pollof American's views of public education found that more than half of the parents surveyed said they do not want their children to become public school teachers—the largest share since the question was introduced in 1969 and the first time a majority of parents answered this way.
The U.S Department of Education closes the school year with the publication of the Teacher Shortage Areas. Researchers point to a lack of available individuals to fill teaching positions as a factor in the teacher shortage, which we explore in a series of reports being released this spring and summer. The shortage is estimated to exceed 110,000 teachers missing in the current school year, according to our colleagues at the Learning Policy Institute.
Why is the role of educating our children becoming so unpopular?
The explanations people would provide for the declining popularity of teaching are many and may vary depending on the respondent and her or his connection to the profession. Still, it is pretty likely that low teacher pay would be a common response, either as a single cause or as an important feature in a constellation of causes that includes disrespect from policymakers, underfunding (which leaves teachers without the supports to handle their day-to-day needs), and disinvestment in the professional supports that help teachers adapt to changing conditions, continue their professional education, and collaborate with one another—key elements of any professional occupation. It's likely that explanations from teachers themselves would emphasize both the lack of professional supports that reflect a lack of appreciation for teaching as a professional like any other profession and the pay penalty they live with.
Teacher complaints about low pay are backed by the evidence. The teacher weekly wage penalty—how much less teachers make than comparable college-educated workers—is both very large (21.4 percent in 2018) and has grown nonstop since our colleagues Sylvia Allegretto and Larry Mishel have been tracking the penalty. In our new report Low Relative Pay and High Incidence of Moonlighting Play a Role in the Teacher Shortage, Particularly in High-poverty Schools we find that more than half of the teachers (59.0 percent) moonlight—performing extra work for pay inside or outside of the school system to supplement their salaries. That share, which uses data from the 2015–2016 school year, is up from 55.6 percent in the 2011–2012 school year.
Moonlighting brings in extra pay— about $4,100, or 7 percent of a teacher's combined salary and moonlighting pay— but at the cost of reduced family and personal time. And low pay is more acute in high-poverty schools. Teachers in high-poverty schools earn $5,600 less, bring in $300 less in moonlighting income, and are less likely to get their moonlighting income from activities that include a career-building component such as coaching, student activity sponsorships, mentoring other teachers, or teaching evening classes.
So how do we address these pay issues in teaching?
First we must understand why teachers are underpaid. Among the possible reasons is the fact that teaching was historically a ‟pink-collar" profession, i.e., one occupied by women, and it is likely that the teacher pay penalty is partly due to a gender pay gap that persists. Also, teachers' salaries are not set in perfectly competitive markets, which may explain why wages do not reflect teachers' real value or reward the investments in education that people make to become a teacher. Likely, the systems in place to fund education and teacher salaries are inadequate, insufficient, and outdated.
Second we must find the policy, social, and political will to implement the necessary fixes. As a society, it's clearly not a smart strategy to underinvest in those who have the responsibility of educating our children and thus nurturing our human and social capital. What would be smart would be to recognize the role of teachers in building human and social capital and understand that we can't advance the quality of education provided to our young people if we don't support the teachers in charge of the task. Higher salaries for teachers is a policy intervention that has the support of academics, and the general public—a record high two-thirds of Americans say teachers are underpaid. And of course pay increases respond to the call by teachers who have walked out for higher pay and other education investments. Rightfully, politicians are putting teachers' matters at the front end of their agendas.
In today's report, we examine low pay and the need to moonlight as contributors to the teacher shortage problem, because they make attracting and retaining teachers in the schools difficult. But beyond the specific findings is the moral implication of our analysis: that whatever the structural, historical, political, or societal causes behind the pay penalty in education, the penalty, at its heart, is just fundamentally unfair and requires a fix that is commensurate with its unfairness.
Bounded rationality, however, is visited upon the elites as well. Their position is always insecure, for their information, understanding, and goals are never fully rational. This allows for occasional resistance and subtle changes by the controlled. In fact, bounded rationality, by elites or their subjects, creates a great deal of change, for it permits unexpected interactions, new discoveries, serendipities, and new goals and values. (123)Perrow emphasizes the inherent diversity of goals and purposes that are operative within an organization at any given point. He describes the "garbage can" theory of organizational goal-setting and problem-setting (135). Executives, managers, and other decision-makers are portrayed as unavoidably opportunistic, in the sense that they address one set of problems rather than another without a compelling reason for thinking that this is the best path forward for the organization.
Goals may thus emerge in a rather fortuitous fashion, as when the organization seems to back into a new line of activity or into an external alliance in a fit of absentmindedness. (135)Associated with this idea is the idea advanced by March and Simon that plans and goals are often adopted retrospectively rather than in advance of action.
No coherent, stable goal guided the total process, but after the fact a coherent stable goal was presumed to have been present. It would be unsettling to see it otherwise. (135)This recognition of the multiplicity and sketchiness of organizational goals casts profound doubt on the functionalism that observers sometimes bring to organizations (the idea that organizations possess the structures and goals they need to optimize the achievement of their goals). Perrow specifically endorses these doubts:
For those doing case studies of organizations it is also indispensable, checking the tendency of social scientists to find reason, cause, and function in all behavior, and emphasizing instead the accidental, temporary, shifting, and fluid nature of all social life.... Garbage can theory provides the tools to examine the process and not be taken in by functional explanations. The decision process must be seen as involving a shifting set of actors with unpredictable entrances and exits from the "can" (or the decision mechanism), the often unrelated problems these actors have on their agendas, the solutions of some that are looking for problems they can apply them to, the accidental availability of external candidates that then bring new solutions and problems to the decision process, and finally the necessity of "explaining" the outcomes as rational and intended. (136, 137)Typology and classification of organizations has been a preoccupation of organizational theory for a century. Perrow believes that we do not yet have a satisfactory basis for classifying organizations, but in his discussion of safety and disaster he provides a typology that has a lot going for it. The scheme sorts organizational tasks along two dimensions: the nature of interactions within the functioning of the organization (linear / complex) and the nature of the coupling of events and processes that exists (loose / tight coupling). His analysis of accidents finds that organizations involving high complexity and tight coupling are most vulnerable to disasters; so nuclear plants, the handling of nuclear weapons, the operations of aircraft, military early warning systems, chemical plants, and genetic research fall in the high-risk category. Motor-vehicle departments, community colleges, assembly-line factories, and post offices fall in the "linear, loose coupling" category and present the lowest risk. The intriguing question that arises here is whether there are organizational features that are best suited to safe and efficient functioning in the four quadrants.
In my scheme, power is the ability of persons or groups to extract for themselves valued outputs from a system in which other persons or groups either seek the same outputs for themselves or would prefer to expend their effort toward other outputs. Power is exercised to alter the initial distribution of outputs, to establish an unequal distribution, or to change the outputs. (259)Two specific examples illustrate this approach. Corporations influence consumers' palate for products, and they do this in ways that serve the interests of one group in society over another. And corporations and industrial bureaucracies have fundamentally shaped the practices and culture of "work" in ways that fundamentally serve the interests of one group over another. Both are examples of the "social construction" of important categories of social life; and corporations (business organizations) are actively involved in this process of social construction. (This is essentially the approach to the definition of "labor" and "work" offered by Bowles and Gintis in Schooling In Capitalist America: Educational Reform and the Contradictions of Economic Life.) This approach to organizations is mirrored in Perrow's book about the emergence of the business corporation in the United States in the nineteenth century, Organizing America: Wealth, Power, and the Origins of Corporate Capitalism.
