In a January, 1998, speech, http://www.bog.frb.fed.us/boarddocs/speeches/1998/19980103.htm, Fed Chair Alan Greenspan, in the context of addressing the (alleged) upward bias of the Consumer Price Index, noted that the official productivity statistics for the service sector of the economy as a whole strain credulity:
"Recent work by staff economists at the Federal Reserve Board has added corroborating evidence of price mismeasurement, using a macroeconomic approach that is essentially independent of the microstatistical exercises [of the Boskin commission]. Specifically, employing disaggregated data from the national income and product accounts, this research finds that the measured growth of real output and productivity in the service sector is implausibly weak, given that the return to owners of businesses in that sector apparently has been well-maintained. Indeed, the published data indicate that the level of output per hour in a number of service-producing industries has been falling for more than two decades. It is simply not credible that firms in these industries have been becoming less and less efficient for more than twenty years. Much more reasonable is the view that prices have been mismeasured, and that the true quality-adjusted prices have been rising more slowly than the published price indexes."
Think about the statement that, according to the official accounts, productivity must have been falling in a series of service industries from the mid-1970s to the mid-1990s. Does that ring true to anyone? Are Target or Kmarts less efficient, more labor-intensive than retailers like Sears two decades ago? Do people remember going to a bank in the mid-70s, standing in line to deposit a paycheck or get pocket money? Is it really true, does it make any sense at all that the manually updated passbook account of yore was a more efficient way of handling deposits than ATMs, online banking, and computer generated statements? Is there any reason to believe that productivity in transportation has been falling? In phone service? At power plants?
This is one reason I expressed skepticism about the 2%/year bank productivity figure. The other reason is that I know that the government DOES NOT PUBLISH productivity figures for the service sector, only for the manufacturing sector and the business sector as a whole (manufacturing + services), so one wonders where the figure came from. WHY the government considers the overall business sector figure to be meaningful enough to publish, when it incorporates service sector numbers that are so unreliable they're considered unpublishable, is anyone's guess.
Jose
-----Original Message-----
From: Doug Henwood <dhenwood at panix.com>
To: lbo-talk at lists.panix.com <lbo-talk at lists.panix.com>
Date: Sunday, August 29, 1999 1:41 PM
Subject: Re: software as capital
Rakesh Bhandari wrote:
>Castells argues that the slowdown of productivity has been concentrated in
>the so called service sector. Then he notes
>
>*the difficulty of measuring productivity in so called services. According
>tohe BLS productivity in banking has only improved by 2% a year. This seems
>to be a fantastic underestimate.
Seems, I know not seems!
I love this argument, which I've heard from the likes of Juliet Schor
as well as Castells & Kudlow. How do they know? The BLS has had
scores of people computing productivity figures for decades. Maybe
they're wrong, but the case has to be made with more than
impressionistic evidence. 2% a year is nothing to sneeze at, either.
>*mfg productivity growth rates have often reached so called Golden Age
>levels, esp. Japan, the US and to a lesser extent UK, suggesting that they
>have indeed assimilated new technologies (CAD, CAM) at a faster rate than
>France and Germany.
And also that they've outsourced a lot of stuff, like accounting and
janitorial services, with very slow productivity growth. So
manufacturing ends up looking very good, but average productivity
doesn't.
Doug
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