Every time some report says that “productivity increased” there’s dancing in the street (Wall Street, at least). Worker bees, however, should start weeping.
Productivity, or more specifically “worker productivity,” can be a slippery concept; but it’s fundamentally simple. Productivity is efficiency’s step-sister, and we all know what efficiency is.
The most commonly talked about, and perhaps easiest to understand, example of efficiency is miles per gallon. Regardless of the price of gas, everyone knows what it is. “Miles per gallon” is just a way of putting a very simple equation into words:
M/G = E
“M”iles divided by “G”allons is “E”fficiency. Simple enough, right?
Worker productivity is more slippery, but fundamentally it is almost the same thing:
S/W = P
“S”tuff made divided by the amount of “W”ages needed to make it is “P”roductivity.
S is generally a good thing for everyone: just about everybody wants more stuff.
Higher P is certainly a good thing for businesses: If P goes up, then so do profit”$”.
For everybody else, higher P may lead to lower prices for stuff.
Here’s where it pinches: worker bees are the ones who are paid those “W”ages. There are two ways of making P go up: you can make S bigger, or you can make W smaller.
It’s not that easy to make S bigger. A manager can’t just say “presto change-o, make more stuff” if everything is already running at top speed. What a manager can do, however, is say “presto change-o, spend less money on wages!” That always works, at least in the short run. It might mean paying workers less, or it might mean laying off workers, but it works.
Do you benefit from bigger $? or are you hurt by smaller W? Which side are you on?