March 8, 1979

Productivity Bottom Line Of Inflation

The most meaningful statistic maintained by the United States government- was released last week to the breathless interest of just about no one.

It is the bottom line to inflation, but few understand its significance.

Growth in productivity, said the Department of Labor, declined to three-tenths of one percent last year -- a record low.

This means that among major industrial nations the American worker is next only to Britons in gold-bricking - in doing the least amount of work for the most amount of pay.

The figure has been sinking steadily from the 3.4 percent of three decades ago.  Then, the U.S. was the envy of the world.  It out produced every other industrial nation through a combination of energetic work habits acquired during World War II, and of high profits that encouraged expansion.

Inflation, unemployment and productivity stepped along together in the same 3 to 4 percent range -- no coincidence of balance.

Then the social tinkering began.

Special interest groups agitated for preference.

Obliging politicians flung dollars at every problem brought to their attentions health, housing, highways, old age security, inner-city decay education, and unemployment just to mention a  few.

Almost imperceptibly the national objective of a "Square Deal" became the "Great Society."  Commendable, but unattainable by political action.

As the authors of our Constitution tried to tell us, the powers of government are limited.  The potential of government, therefore, is likewise constrained.  Life at the personal level turns most heavily on personal effort.

To finance the good life, government raised income taxes to the point-it discouraged incentive.

Corporate profits were double-taxed, thereby drying up expansion funds.

Rewards of prudent investment were confiscated by exorbitant capital gains and estate taxes.

Giant unions paralyzed the nation time and again to extort more pay for less work.

Big business recovered higher costs through quick price increases rather than greater efficiency.

To achieve expectations, all of us began borrowing against the future -- most particularly the government which does not have to put up collateral and thereby can borrow for the indigent.

But the piper must be paid.

Unsecured debt is exactly equal to inflation.  No debts can be paid, and inflation stopped, until we produce and sell more than we consume.  At present we are hand-to-mouth, in danger of slipping into economic insufficiency.  Once we start eating the seed corn we are all through.

Fortunately all is not yet lost.  There are a few signs that common sense is overtaking us.

Congress returned the capital gains tax to its original, lower level to lure back investment capital into production technology.

Tax credits for job-producing and cost-cutting equipment have been extended to industry.

The relationship of government spending and borrowing to inflation is now recognized.  Once it is decided what special interests are to be sacrificed on the economic altar we can expect some winding down of inflation.

Resistance to labor union demands is stiffening.  Interestingly workers themselves perceive unions as counter productive and opt for cooperation with employers.  The decline in industrial union membership, and the refusal of Congress any longer to enact sweetheart labor laws, indicates the new mood.

All of these things are helpful, but the production battle will be won in the front lines of individual jobs.

A highly placed executive in the automobile industry told me recently that the average auto worker devotes only 55 percent of his in-plant time to assigned production tasks.  Nearly half the work time is taken up with idle conservation, coffee breaks, rest room and water fountain trips, extended lunches, tardiness, early departures and waiting for others to pass along their part in the production process.

He did not suggest that employees should be churning out widgets 480 minutes of every work day.  The attention span of human minds is not capable of uninterrupted performance.

He did wish, however, that the percentages could be improved a little.

"A five percent increase in actual working time would cut the average price of a car $150 and enable us to recapture about half the foreign-car market in the U.S.," he declares.  "And this would create more than 100,000 new jobs in U.S. auto plants!"

Under the circumstances, it is easy to understand why the shakers and movers of our economy are so frustrated.  Only a small amount of extra effort and self restraint, equally shared, is necessary to solve our problems:

• Five more minutes per hour of useful work.
• One less gallon of gasoline per week.
• Five percent cut in taxes.
• A nickel more profit.
• One more job per company.

Put them all together and they spell production - the password to prosperity.

Author: Lindsey Williams