The Key to U.S. Industrial Progress

TO delegates of the United Automobile Workers convening in Atlantic City last week (see NATIONAL AFFAIRS) U.A.W. President Walter P. Reuther announced a new labor goal. Next year, he said, the U.A.W. will demand a "shorter workweek with increased take-home pay," leading as rapidly as possible to a four-day workweek for auto workers and for all of industry. The cost can easily be paid, said he, out of the "increased productivity of the tools of production." But can it?

Unfortunately, even as U.A.W.'s Reuther was pinning such large hopes on productivity, evidence was piling up that for the past year something has gone wrong with American productivity. It has not been increasing at the expected rate.

Although statistics on productivity are sparse and confusing, economists roughly estimate that the productivity of U.S. industry, increased an average of 2.5% a year from 1909 to 1947.

In 1947 the Bureau of Labor Statistics began to keep a closer watch on productivity, made spot checks throughout industry. It found that from 1947 through 1953 productivity of benchworkers in manufacturing increased between 3% and 3.6% a year. In 1954 and 1955 the rate of increase rose to 4.5%. But in 1956 it dropped sharply to between 1% and 2.5%. Furthermore, these figures did not include nonproduction workers, who are usually a brake on the increase in productivity since it is impossible to mechanize many service jobs.

More important, the number of white-collar and other service employees per production worker is on the increase because more of them are needed to sell, distribute and service the greater outpouring of goods from the more efficient production lines. If all factory employees were counted in, said BLS, it would be necessary to subtract at least 1% from the manufacturing productivity gains in 1954, 1955 and 1956. This would all but wipe out any gain last year.

One comforting fact is that productivity has never risen at a steady rate. Economists estimate that between 1910 and 1953 there were eleven years when productivity actually fell, e.g., during wartime, productivity declined as the flow of materials and manpower was disrupted. Even in times of boom, as at present, productivity has often fallen; plants operating at top capacity find it hard to raise output.

Furthermore, a record total of men, money and managerial skills were diverted last year from current production to preparing $35 billion in new plants and equipment for future production. The benefits of this, like the benefits from the other $108 billion spent on expansion in the last five years, will take a long time to realize. Said a Pittsburgh steelman: "Three years ago we put in a lot of new equipment. But the men called our work standards unreasonable. All kinds of mysterious breakdowns occurred. We are just now getting productivity up near where it should be." George W. Cloos, economist of Chicago's Federal Reserve Bank, estimates that the benefits from capital investment last year will not show up in productivity until 1960 or later.

While more efficient plants are counted on to increase productivity, other factors are involved. Many an industrialist feels that management must do a sharper job of managing than ever before, must do more in the field of human relations, of incentives, and goals. Labor also has a big job, notably to cooperate with management to assure efficient use of new equipment.

A prime example of how productivity can be boosted in a short time with such cooperation was demonstrated at Chrysler. More than a year ago, with sales sagging and 45,000 of its 130,000 production workers laid off, Chrysler retooled and modernized its production lines, got tacit approval from the U.A.W. to increase output per man. Today, with 110,000 workers, Chrysler is making almost as many cars as in 1955. But this has also brought protests from union locals against the "speedup." To bring pressure on the corporation for a change in production quotas, the U.A.W. last week ordered Chrysler members to stop working overtime, thus forcing a cut in Chrysler production--and in productivity.

Such troubles, not only at Chrysler but other plants, have raised doubts about the continued rise in U.S. productivity. There are other problems, such as how the benefits of increased productivity shall be divided among labor, investors and consumers. Said Henry Ford II recently; "Any attempt by labor or capital to grab the total increase in productivity, or more, can lead only to price inflation and/or shrinkage of the total market." But if management and labor can agree on an equitable split that will also mean increased dividends to investors plus stable or lower prices to consumers, then most economists believe that the failure to step up productivity in 1956 will soon be overcome.

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