Reuters: Productivity Grows amid Labor Shortage, Rising Wages

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Companies are boosting Americans’ productivity with better software, faster robots, and more machines, according to a Reuters survey of company reports.

Investment in productivity is being forced by the labor shortage in President Donald Trump’s “Hire American” economy, says the article, which is headlined “U.S. companies facing worker shortage race to automate.”

The companies use the investments to make the employees more efficient, which frees up the savings, which then fund continued wage raises for workers and higher stock-values for investors,  according to the article:

The attempt to save money through technology does not come down to just installing more robots in factories. Instead, companies appear to be confronting the lack of low-cost workers by investing in software and machines that can perform tasks ranging from human resources management to filling prescriptions.

Those investments are helping keep wage growth in line despite historically-low unemployment. Average hourly earnings were unchanged in October despite the unemployment rate falling to 3.5% from 3.7%, while the annual increase in wages fell slightly to 2.9%.

The evidence for the good news comes from the quarterly briefings which executives hold with Wall Street’s investment advisors, says Reuters:

Overall, companies have discussed automation on quarterly earnings calls more than 1,110 times since the beginning of the year, a 15% increase from this time last year and nearly double the mentions by this time in October, 2016, according to Refinitiv data. Corporate orders of robotics alone rose 7.2% over the first half of this year compared with 2018, totaling $869 million in spending, according to the Association for Advancing Automation.

In part, the productivity gains are intended to help employers avoid a bidding war for workers that would drive up salaries and also cut the profits sought by shareholders. But the investment options create wealth for investors and workers, so also expanding the nation’s economic growth.

Advocates for reduced immigration have long predicted this trifecta goal of rising wages, profits, and productivity.

However,  most business groups prefer to maximize wealth for shareholders by simply adding migrant workers so they can cut wages and investment spending.

But a shortage of immigrants is best for the long-term growth of employees’ personal wealth, partly because it forces employers to push for productivity increases.

Trump has ensured a shortage of workers by repeatedly rejecting demands from business groups for more unskilled and more skilled workers. So Trump’s “Hire American” policy is forcing companies to hire Americans — and also to give them better tools in kitchens, warehouses, factories, and office parks.

Economists have worried about the slowing annual growth in productivity since the early 2000s. They are often reluctant to blame the extra labor-supply caused by migration, even as they create new jargon to hide the impact of lower-skilled immigrants. For example, a March 2017 report by McKinsey admitted “a shift in the composition of employment in the economy toward lower-productivity sectors” contributes to the problem, but then quickly changed the subject.

But economists are becoming optimistic recent productivity gains may become a multi-year trend.


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