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Old 03-07-2010, 09:42 AM   #1
mesaSteeler
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Default Trading Away Productivity

Trading Away Productivity
By ALAN TONELSON and KEVIN L. KEARNS
http://www.nytimes.com/2010/03/06/op...ml?ref=opinion
Washington

FOR a quarter-century, American economic policy has assumed that the keys to durable national prosperity are deregulation, free trade and a swift transition to a post-industrial, services-dominated future.

Such policies, advocates say, drive innovation, which leads to enormous labor productivity and wage gains — more than enough, supposedly, to make up for the labor disruptions that accompany free trade and de-industrialization.

In reality, though, wage gains for the average worker have lagged behind productivity since the early 1980s, a situation that free-traders usually attribute to workers failing to retrain themselves after seeing their jobs outsourced. (It's very difficult for someone in their 40's or 50's to retrain. Even if they do then start over again at the bottom of the wage scale. - mesa)

But what if wages lag because productivity itself is being grossly overstated, especially in the nation’s manufacturing sector? Then, suddenly, a cornerstone of American economic policy would begin to crumble.

Productivity measures how many worker hours are needed for a given unit of output during a given time period; when hours fall relative to output, labor productivity increases. In 2009, the data show, Americans needed 40 percent fewer hours to produce the same unit of output as in 1980.

But there’s a problem: labor productivity figures, which are calculated by the Labor Department, count only worker hours in America, even though American-owned factories and labs have been steadily transplanted overseas, and foreign workers have contributed significantly to the final products counted in productivity measures.

The result is an apparent drop in the number of worker hours required to produce goods — and thus increased productivity. But actually, the total number of worker hours does not necessarily change.

This oversight is no secret: as Labor Department officials acknowledged at a 2004 conference, their statistical methods deem any reduction in the work that goes into creating a specific unit of output, whatever the cause, to be a productivity gain.

This continuing mismeasurement leads economists and all those who rely on them to assume that recorded productivity gains always signify greater efficiency, rather than simple offshoring-generated cost cuts — leaving the rest of us scratching our heads over stagnating wages.

Of course, just because productivity is mismeasured doesn’t mean that genuine innovations can’t improve living standards. It does mean, however, that Americans are flying blind when it comes to their economy’s strengths and weaknesses, and consequently drawing the wrong policy lessons.

Above all, if offshoring has been driving much of our supposed productivity gains, then the case for complete free trade begins to erode. If often such policies simply increase corporate profits at the expense of American workers, with no gains in true productivity, then they don’t necessarily strengthen the national economy. (Having watched the destruction of America's manufacturing base over the last 30 years I think offshoring and "free" trade are destroy this country. - mesa)

In this regard, the case for free trade as a stimulus for innovation weakens, too. Because productivity gains in part reflect job offshoring, not just the benefits of technology or better business practices, then the American economy has been much less innovative than widely assumed.

How can we actually increase innovation and real productivity? Manufacturing, long slighted by free-market extremists, needs to be promoted, not pushed offshore, since it has historically accounted for the bulk of research and development spending and employs the bulk of American science and technology workers — who in turn spur further innovation and real productivity. (I've read other articles saying that 60% of R&D is done in manfacturing plants. Every time we offshore a plant we lose not only the jobs but we also lose all the R&D. - mesa)

Promoting manufacturing will require major changes in tax and trade policies that currently foster offshoring, including implementing provisions to punish currency manipulation by countries like China and help American producers harmed by discriminatory foreign value-added tax systems. It also means revitalizing government and corporate research and development, which has languished since its heyday in the 1960s.

Much of government policy and business strategy rides on false assumptions about innovation, and although the Obama administration acknowledges the problem, it has done nothing to correct it. With the economy still in need of government life support and the future of American manufacturing in doubt, relying on faulty productivity data is a formula for disaster.

Alan Tonelson, a fellow at the United States Business and Industry Council, is the author of “The Race to the Bottom.” Kevin L. Kearns is the president of the council, which is an association of small manufacturers.
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Old 03-07-2010, 09:54 AM   #2
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Default Re: Trading Away Productivity

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Manufacturing, long slighted by free-market extremists, needs to be promoted, not pushed offshore
"free-market extremists". LOL.

Just curious Mesa.....do you feel that the fact that our corporate tax rates are THE 2ND HIGHEST IN THE ENTIRE WORLD contributes to this problem in any way?...
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Old 03-07-2010, 10:55 AM   #3
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Default Re: Trading Away Productivity

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"free-market extremists". LOL.

Just curious Mesa.....do you feel that the fact that our corporate tax rates are THE 2ND HIGHEST IN THE ENTIRE WORLD contributes to this problem in any way?...
You ignore the fact that due to the large number of loop holes very few, if any, companies if any pay the full corporate tax rate.
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Old 03-07-2010, 10:57 AM   #4
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Default Re: Trading Away Productivity

I asked you a very simple question and you completely dodged it....why?
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Old 03-07-2010, 11:56 AM   #5
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Default Re: Trading Away Productivity

Spread the wealth, spread the wealth!

Wheres my free stuff?


For small business the "loop holes" aren't that big. Enjoy your job while you have one!
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Old 03-07-2010, 07:26 PM   #6
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Default Re: Trading Away Productivity

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Originally Posted by mesaSteeler View Post
You ignore the fact that due to the large number of loop holes very few, if any, companies if any pay the full corporate tax rate.
So does it upset you if a company pays less than the 2nd highest tax rate in the world and legally keeps more of THEIR hard earned money?

I really just have no idea what your point is.
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Old 03-07-2010, 08:00 PM   #7
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Default Re: Trading Away Productivity

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So does it upset you if a company pays less than the 2nd highest tax rate in the world and legally keeps more of THEIR hard earned money?

I really just have no idea what your point is.
His point is that corporate taxes aren't as high as you say because there are deductions to offset the higher nominal rates. Don't know how accurate that is, but I understand his point.
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Old 03-07-2010, 08:42 PM   #8
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His point is that corporate taxes aren't as high as you say because there are deductions to offset the higher nominal rates. Don't know how accurate that is, but I understand his point.
WE have deductions and other countries don't?

So because we have deductions our corporate taxes really aren't THAT high and therefore it isn't a factor in companies being forced overseas?

High taxes and government regulations both stifle our R&D and productivity and cause companies go overseas.

Whenever I read a one-sided articles like this that states things like
Quote:
With the economy still in need of government life support
I role my eyes because it is usually both written and embraced by intellectual elitists who have not been in the trenches.
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Old 03-08-2010, 08:16 AM   #9
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Default Re: Trading Away Productivity

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WE have deductions and other countries don't?

So because we have deductions our corporate taxes really aren't THAT high and therefore it isn't a factor in companies being forced overseas?
I have no idea what other countries do.

I'd have to look up the information on our largest corporations to find out what their effective (not nominal) tax rate is, and that will give us an idea of how much of the problem can be attributed to that factor.

One of our biggest problems is we don't really have free trade. The Chicoms use slave labor and manipulate their currency. Plus we're dumb enough to let the WTO make decisions based on anti-Americanism instead of doing its job (remember when Venezuela didn't like our environmental laws and the WTO falsely claimed that was a free trade violation?)
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Old 03-08-2010, 08:49 AM   #10
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Default Re: Trading Away Productivity

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Godfather

One of our biggest problems is we don't really have free trade.

The Chicoms use slave labor and manipulate their currency.
What do you suggest we do about slave labor?

What do you suggest we do about currency manipulation?

Quote:
Godfather

Plus we're dumb enough to let the WTO make decisions based on anti-Americanism instead of doing its job

(remember when Venezuela didn't like our environmental laws and the WTO falsely claimed that was a free trade violation?)
Very good point.
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