Another Interesting Post On Technology, Jobs And Salaries

Here is an interesting post by economist Tim Taylor, reposted by Mark Thoma.  It addresses issues of manufacturing productivity and suggests the only bright spot is computers. And that sector isn't doing much for jobs. Capital rather than labor scarfs up the profit.

I think this fits in with my previous post on technology, jobs and salaries. Taylor's post clarifies many of the issues involved in assessing manufacturing productivity. The picture may not be as rosy as government statistics indicate. Taylor explains: "Our statistical agencies try to measure price changes, but they miss them when the price drops because companies have shifted to a low-cost supplier. So because we don’t catch the price drop associated with offshoring, it looks like we can produce the same thing with fewer inputs—productivity growth. It also looks like we are creating more value here in the United States than we really are."

"Suppose," Taylor explains, "an auto manufacturer used to buy tires from a domestic tire manufacturer. Then it outsources the purchase of its tires to, say, Mexico, and the Mexicans sell the tires for half the price. That price drop—when the auto manufacturer switches to the low-cost Mexican supplier—isn’t caught in our statistics. And if you don’t capture that price drop, it’s going to look like, in some statistical sense, the manufacturer can make the same car but only needs two tires."

Figures don't lie....