15.3.04

DO I HEAR AN ECHO? From the weekend:
Add to that the obligation of an employer to pay person-dependent (rather than effort-dependent) fringe benefits including but not limited to health and unemployment insurance premiums, and employers will reveal a preference to pay their existing workers overtime and to prefer offshore workers with lower setup costs rather than to expand their domestic hiring.
(Been there, researched that, published the article.) Now, Professor Drezner links to a Business Week essay advancing the thesis, "The drive for productivity gains is the real culprit behind anemic job growth." Erm, in part. Scroll down.
The soaring cost of employee benefits is making companies increasingly hesitant to add workers unless absolutely needed. Benefits costs, fueled by sky-high health-care premiums and the need to restore underfunded pension plans, are up 6.5% from a year ago. After adjusting for inflation, that's the fastest clip on record. If a company can get three people to do the work of four, that's one less health-care premium it has to pay.
Then keep scrolling.
The pace of efficiency gains always slows as a recovery picks up steam, but no one is really sure how much. The question is how long companies can meet this big increase in demand without expanding their workforces. "We're getting up close to the point where firms will of necessity have to hire additional people to sustain the growth they see in the demand for their products and services," Treasury Secretary John W. Snow told BusinessWeek. To judge by history, business cannot lean on the workforce so heavily for much longer
. Time also to consider the income and substitution effects of larger pay packets.

The real poser, however, comes early in the article.
What's confounding economists is that high-growth, high-productivity periods in the past -- the mid-'60s, say, or the late '90s -- have coincided with robust job creation. Consider that from 1997 to 1999, the economy expanded an average of 4.5% annually, productivity growth accelerated sharply, and 264,000 jobs per month were created. So why isn't the same thing happening this time around?
It is worth remembering that economic growth and productivity growth do not have to be bundled. There was a lot of productivity growth during the 1930s.

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