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Politicians say we have the most productive workers in the world. They don't know what they're talking about.
By Michael Mandel
Alternatively, companies can cut costs by seeking out cheaper suppliers around the worldto use the business school term, they can engage in global supply chain management. A U.S.-based computer company can lower its costs by moving its customer call center from South Dakota to India, Walmart can shift its clothing purchases from a Chinese shirt manufacturer to a cheaper supplier in Vietnam. Apple can find a cheaper offshore supplier for its iPhone display screen.
But heres the rub: both of these corporate strategies domestic productivity improvements and global supply chain managementshow up as productivity gains in U.S. economic records. When federal statisticians calculate the nations economic output, what they are actually measuring is domestic value addedthe dollar value of all sales minus the dollar value of all imports. Productivity is then calculated by dividing the quantity of value added by the number of American workers. American workers, however, often have little to do with the gains in productivity attributed to them. For instance, if Company A saves $250,000 simply by switching from a Japanese sprocket supplier to a much cheaper Chinese sprocket supplier, that change shows up as an increase in American productivityjust as if the company had saved $250,000 by making its warehouse operation in Chicago more efficient.
Read more The Washington Monthly - The Magazine - The Myth of American Productivity
By Michael Mandel
Alternatively, companies can cut costs by seeking out cheaper suppliers around the worldto use the business school term, they can engage in global supply chain management. A U.S.-based computer company can lower its costs by moving its customer call center from South Dakota to India, Walmart can shift its clothing purchases from a Chinese shirt manufacturer to a cheaper supplier in Vietnam. Apple can find a cheaper offshore supplier for its iPhone display screen.
But heres the rub: both of these corporate strategies domestic productivity improvements and global supply chain managementshow up as productivity gains in U.S. economic records. When federal statisticians calculate the nations economic output, what they are actually measuring is domestic value addedthe dollar value of all sales minus the dollar value of all imports. Productivity is then calculated by dividing the quantity of value added by the number of American workers. American workers, however, often have little to do with the gains in productivity attributed to them. For instance, if Company A saves $250,000 simply by switching from a Japanese sprocket supplier to a much cheaper Chinese sprocket supplier, that change shows up as an increase in American productivityjust as if the company had saved $250,000 by making its warehouse operation in Chicago more efficient.
Read more The Washington Monthly - The Magazine - The Myth of American Productivity