Sunday, February 15, 2015

Productivity and Professors ... What the Teachers Don't Know They Can't Teach

A friend of mine passed along an editorial from the Peoria, Illinois newspaper written by an economics professor at Bradley University. My reaction is a negative one. See what you think.

Now here's what the good professor had to say about the relationship between pay and productivity.

"Right- to- work zones: The problem with one- sided thinking
Gov. Bruce Rauner has proposed the establishment of “right-to-work zones” in Illinois in order to improve Illinois’ competitiveness in attracting and retaining businesses. The underlying basis for this recommendation is that Illinois is not competitive due to high labor costs and the restrictions on working conditions resulting from union-management negotiated contracts. There are two approaches to improving the competitiveness of Illinois for business location. One is to lower the cost of operating in the state through strategies such as the governor’s proposed right-to-work zones. The other is to focus on improving the productivity of the state’s workforce, making the state a more profitable place to conduct business. Let’s consider the implications of each approach.
The right-to-work zones strategy will lead to declining wage rates. While this will attract businesses that are looking for low-cost workers, this strategy will also encourage more productive workers to leave the state in search of better opportunities elsewhere. As a result, average productivity levels in Illinois will decline, reducing the state’s attractiveness for business location.
As an alternative, programs could be enhanced to increase the productivity of Illinois’ workforce. This approach not only will result in increased profitability for businesses, it also will attract more productive workers to Illinois, increasing the attractiveness of the state for business location.
The governor’s strategy only considers the supply side of the labor market. Instead, by considering the demand side of the labor market, we can see that the optimum long-term strategy is not to lower wage rates to attract business. Focusing on lower labor costs will lead to a downward spiral in the state’s standard of living. By focusing on increasing the productivity of Illinois workers instead, the demand for labor will be increased, resulting in not only more business location within the state but also higher standards of living for Illinois workers.
I am in no way ignoring the need for labor unions to recognize that increases in labor wages must be matched by improvements in worker productivity in today’s globally competitive environment. U.S. firms must be able to produce products that are price competitive. This requires unions to adopt strategies that do not degrade our competitiveness by increasing wages without compensatory improvements in worker productivity.
U.S. firms and organized labor need to work together to ensure that our products and services are of the highest quality and priced to compete on a global basis.
BOB WEINSTEIN, Ph. D., is a professor of economics at Bradley University, specializing in regional economic development and labor economics. He lives in Peoria."
Now here's my take.
Summing Up
Professor Weinstein misses the point. In fact, productivity is what makes a nation, a company and an individual prosper.
When we were kids, coaches taught that it wasn't the hours we put in that mattered most; it was what we put in to the hours. They had it half right. In fact, it's both.
The time we spend mastering any task matters, and so does how productive we are during the time we spend on mastering that task. In a society, the number of people working and the amount of work they get done in a given amount of time determine that society's overall prosperity. And so it is with individuals and the organizations that employ them as well.
Public sector productivity is lousy in America. And right up there near the top of 'lousiness' must be our college professors. Productivity isn't even an afterthought in public education.
And by the way, labor unions rely on growing memberships for dues. Thus, they generally oppose productivity enhancements which would limit workforce growth. And if it's a public sector employer, it's the taxpayers and individual citizens who must foot the public union's bill.
The plain fact is that wage levels aren't the issue; the real and only issue is value received for money spent, aka productivity.

It's as simple as 1-2-3. (1) Getting more output for any given level of input, (2) getting the same output for less input, and (3) hitting the bonanza and getting more output for less input are the only legitimate answers to our economic woes.
If we're productive enough, the pay and benefits will be there. If not, it's game over. That's how competition works to give us the biggest bang for the bucks we earn.
That's my take.
Thanks. Bob.

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