4 ms·

If a US company has higher revenue then they appear more productive. It could be that they have reached that productivity by using off shore workers. So the nu

by xupybd 5y ago

If a US company has higher revenue then they appear more productive. It could be that they have reached that productivity by using off shore workers. So the number of people indirectly involved in the US economy has increased.

dangus 5y ago
But the article isn't talking about company revenue, it's talking about worker productivity - income generated in an hour of work.
- xupybd 5y ago
  How do you calculate income generated in an hour of work without looking at revenue?
  - dangus 5y ago
    What I'm trying to say is that labor productivity does not have anything to do wages. We can talk about productivity in terms of output divided by input wages, too, but that's not what this article is talking about from what I can tell. It is strictly talking about workers in the US and it's talking about how much output they can generate from each hour of labor performed, regardless of what they are being paid. (I will say, the article's own loose terminology does make it a little ambiguous, but to me the context of the article points squarely at labor productivity: output per hours worked, not hours per wage earned) Let's take an example: Chinese worker works 40 hours at $5/hour US worker works 40 hours at $25/hour Weekly total sales of product from each plant is 1,000 units at $10 per unit, so revenue is $10,000 So, now we divide revenue by hours worked for labor productivity. In this example, whether the employee is Chinese or US their labor productivity is still $10,000/40 = 250 Obviously, this hypothetical company might choose to mainly use Chinese labor for this particular product, but that doesn't change the fact that each employee is equally productive in this example. If this hypothetical company chose to increase offshoring, their revenue would not increase because the output is worth the same either way, but their profit would increase if all other costs remain the same.
    - xupybd 5y ago
      Ah I think I know where we are crossing wires. I'm wondering if they have hidden the hours worked offshore. So it it looks like productivity per hour is up but actually it's happening off the books of US companies. So in the example. The US plant has US workers that input say 20 hours to make 1000 parts. But buys in a component made in China and that component has 1000 hours per 1000 output parts. The US company sees that component as a material cost not a labor cost so doesn't count that as labor going into the end product. I hope I'm making sense?
      - dangus 5y ago
        I see what you mean. In this theory it's almost like US labor faces a survivorship bias. In your hypothetical example, a US company wouldn't really keep a factory open in the US that produces 1000 outputs per 1000 hours. They'd rather purchase the good as an input material from an overseas factory. e.g., Apple's iPhones aren't produced at all by Apple employees. Another topic we never really reached in this discussion is how worker productivity is affected by capital investment: Is a McDonald's worker more productive than they were in 1980 because of their own abilities and skills improving, or is it due to computerized and automated assistant devices like automatic drink pouring machines and sophisticated point of sale software?

by xupybd 5y ago

dangus 5y ago

But the article isn't talking about company revenue, it's talking about worker productivity - income generated in an hour of work.

xupybd 5y ago
How do you calculate income generated in an hour of work without looking at revenue?
- dangus 5y ago
  What I'm trying to say is that labor productivity does not have anything to do wages. We can talk about productivity in terms of output divided by input wages, too, but that's not what this article is talking about from what I can tell. It is strictly talking about workers in the US and it's talking about how much output they can generate from each hour of labor performed, regardless of what they are being paid. (I will say, the article's own loose terminology does make it a little ambiguous, but to me the context of the article points squarely at labor productivity: output per hours worked, not hours per wage earned) Let's take an example: Chinese worker works 40 hours at $5/hour US worker works 40 hours at $25/hour Weekly total sales of product from each plant is 1,000 units at $10 per unit, so revenue is $10,000 So, now we divide revenue by hours worked for labor productivity. In this example, whether the employee is Chinese or US their labor productivity is still $10,000/40 = 250 Obviously, this hypothetical company might choose to mainly use Chinese labor for this particular product, but that doesn't change the fact that each employee is equally productive in this example. If this hypothetical company chose to increase offshoring, their revenue would not increase because the output is worth the same either way, but their profit would increase if all other costs remain the same.
  - xupybd 5y ago
    Ah I think I know where we are crossing wires. I'm wondering if they have hidden the hours worked offshore. So it it looks like productivity per hour is up but actually it's happening off the books of US companies. So in the example. The US plant has US workers that input say 20 hours to make 1000 parts. But buys in a component made in China and that component has 1000 hours per 1000 output parts. The US company sees that component as a material cost not a labor cost so doesn't count that as labor going into the end product. I hope I'm making sense?
    - dangus 5y ago
      I see what you mean. In this theory it's almost like US labor faces a survivorship bias. In your hypothetical example, a US company wouldn't really keep a factory open in the US that produces 1000 outputs per 1000 hours. They'd rather purchase the good as an input material from an overseas factory. e.g., Apple's iPhones aren't produced at all by Apple employees. Another topic we never really reached in this discussion is how worker productivity is affected by capital investment: Is a McDonald's worker more productive than they were in 1980 because of their own abilities and skills improving, or is it due to computerized and automated assistant devices like automatic drink pouring machines and sophisticated point of sale software?