What’s Behind Productivity Drives?

The average worker creates over $14 of wealth each hour.
Why are wages less than $5?

None of the many and often confusing categories of economics comes closer to the heart of the wages system than productivity. Though usually presented as a simple measure of efficiency and output, productivity figures are in fact yardsticks of labor’s exploitation.

Workers often realize this instinctively and equate talk of productivity with speedup. But the real meaning of productivity measures becomes clear only with a deeper look at the production process.

Wages and Profits

Productivity statistics are generally presented in terms of “unit labor costs.” In a capitalist economy this “unit” is a commodity—a good or service produced for sale by wageworkers.

The value of any commodity is determined by the amount of socially necessary labor time consumed in its production. Some of this value is already crystallized in the raw materials and other capital goods needed for a new product. For example, if $1,000 worth of steel is used in the making of a car, that value reappears in the price of the automobile.

But in the process of turning steel and other materials into a car, another quantity of value is created. The labor expended by workers adds values to the materials used. This added value is the crucial quantity at any given step along the production process.

It’s out of the added value that both workers’ wages and capitalists’ profits come. If a capitalist must supply $1,000 worth of steel, he generally has to pay that much for it. There is no new value created in this even exchange, and nothing to divide.

But if his workers add another $1,000 of value in the course of their labor, the capitalist pays only part of the new value back to his workers as wages, keeping the rest as what Marx terms surplus value.

Several things fall into place once this process is understood. First, the wages workers receive come as no gift from the boss, but are just a portion of the wealth workers produce.

Second, profits are made not primarily by cheating in the market or arbitrarily adding a “profit margin” to the price of a commodity. Instead, they come from appropriating at the point of production the greater portion of the values labor creates.

Third, by measuring things like unit labor costs, output per hour, etc., productivity figures help keep tabs on this process of exploitation.

Is this actually the case in U.S. factories and plants? Well, in 1973 the Commerce Department says $404 billion worth of value was added in all manufacturing operations. It took 14 million production workers some 28 billion hours to produce it, which means they created values at a rate of about $14.40 an hour. The same survey shows that the hourly gross wage for those production workers was about $4.22. (Annual Survey of Manufactures, 1973.)

These figures tell just part of the story, but they clearly and accurately reflect the essential nature of the wages system. Each new quantity of value is unevenly divided between capitalist and worker. When productivity drives manage to accelerate the process of value production, they also accelerate the uneven divisions.

Productivity Experiments

The business section of the January 30 New York Times cited six different experiments in which this occurred. In various parts of the country, the rank and file were offered “productivity incentives” which supposedly gave them a stake in boosting output. Actually, like most productivity drives, they amounted to instituting, with much fanfare, a form of piece wages in which earnings were pegged to production.

(Piece wages, said Marx, are “the form of wages most in harmony with the capitalist mode of production,” since, in addition to the normal exploitation of a wages system, this form encourages workers to drive themselves as hard as possible.)

Quotas and standards were worked out in each of the experiments. In one warehouse, for example, packers and checkers were given individual quotas. In receiving sections, group quotas were imposed since individual output couldn’t be easily monitored. In all cases, the same principle prevailed: If workers exceeded normal output, they’d receive more pay.

According to the management consultant who wrote the Times article, “Workers somehow found a ‘second wind’ and became more productive when they knew that there was a direct link between compensation and performance.” The results brought workers in the six experiments an average 21 percent rise in their pay. It brought their bosses a 57 percent boost in productivity, and a 33 percent drop in unit labor costs.

The experiments demonstrated perfectly how productivity drives allow capitalists to “generously” boost wages while greater output offsets the hikes and raises profits several times over. They also show how the wage boosts feed the illusion that productivity drives are beneficial to all, even though higher exploitation rates and eventual layoffs are their inevitable offspring.

The Times article concluded with suggestions that these experiments could be extended to all kinds of jobs, especially clerical and government work. New devices for establishing quotas on jobs previously beyond the reach of “efficiency experts” are already on the market.

An understanding of what lies behind productivity also exposes the most common theme of employers around contract time, namely that in a “healthy economy,” wage increases should not exceed rises in productivity. Wherever bosses manage to make this logic stick, wage hikes cost them nothing. If workers boost productivity by, say, 3 percent, it’s possible to raise wages 3 percent without narrowing at all the gap between workers’ pay and surplus value. Like most of “management’s” economic formulas, it amounts to a defense of profits.

(Reprinted from the Weekly People, February 16, 1977)

Socialist Labor Party of America, P.O. Box 218, Mountain View, CA 94042-0218 • www.slp.org • socialists@slp.org

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