Michael Porter vs States Governor’s
This is a great article from Martin Schram on states budget deficits and productivity. Dr. Michael Porter told the governors productivity, “sets standard for whether your particular state is going to succeed.” ”If you are productive you can be prosperous. If not, you can’t.” To be productive a state needs to invest in education and infrastructure. If not they will be regulated to the back of the pack both nationally and globally!
Productivity, Wages and Demand
Productivity and Wages: Successful Business Partners (PDF)
“Productively measures how efficiently economic inputs are converted into output, which are the goods and services that business sells. So when more is produced with the same or less we can increase income (that is value added) and potentially increase profit.”
Productively has one underling assumption, demand. If there is no demand then productively is not a factor. If demand declines, similar to our current situation, productively is everything. We see companies trying to deal with lack of demand by laying off large numbers of employees. Those left, do work harder and longer hours, but likely are producing significantly less as a result of decreased demand. This is one of the reasons wages are flat, there is simply no way to increase prices even-though everyone is working harder.
Productivity and Wages: Successful Business Partners
This paper provides a sample calculation which demonstrates how to think about wages and productively when plugged into your demand formula.
Sources:
Bureau of Labor Statistics – Productivity
CEPR – Price Byte
Capacity Utilization- Dismal by any Standard
The Post and Courier printed an article Factories Bright Spot for the Economy, which indicated manufacturing was going to pull this economy out of the recession based on a report by the Institute of Supply Management (ISM). If you are in manufacturing, you may be wondering what playbook they were referencing. I also question these data after reviewing capacity utilization data issued by the Federal Reserve.
Capacity utilization (percent of factory capability) data is the lowest since the series started. When one reviews these data it is nothing short of astonishing that many of our manufacturing companies are still in business. The Federal Reserve states “Capacity utilization for total industry edged up to 72.0 percent in December, a rate 8.9 percentage points below its average for the period from 1972 to 2008.” Industrial production is the benchmark. Not only is the data accurate, but it confirms what many know in their respective industries; manufacturing production is struggling and not likely to lead the economy anytime soon.
