The productivity of foreign workers is not falsely attributed to American workers as George Mason Professor Donald Boudreaux explains in his letter to the editor. The understanding of productivity measurements promoted in a New York Times op-ed piece is “fatally confused,” he says…
Wrongheaded economic ideas that translate into flawed public policy still find their way into circulation thanks in no small part to the disinformation spread by a compliant news media. In a letter to the editor from Donald J. Boudreaux, professor of economics at George Mason University, wrote as a rejoinder to piece appearing in The New York Times, the rationale for higher tariffs is taken down in short order.
Alan Tonelson, a fellow at the United States Business and Industry Council and Kevin L. Kearns, president of the council, argued in a recent op-ed piece that the U.S. Labor Department is overstating U.S. productivity by way of omitting the contribution of foreign workers. Free-traders have it wrong because their measurements do not properly account for “offshoring-generated cost cuts” and incorrectly assume for new efficiencies that are not actually present in the economy.
“…as Labor Department officials acknowledged at a 2004 conference, their statistical methods deem any reduction in the work that goes into creating a specific unit of output, whatever the cause, to be a productivity gain,” the op-ed states. “This continuing mis-measurement leads economists and all those who rely on them to assume that recorded productivity gains always signify greater efficiency, rather than simple offshoring-generated cost cuts — leaving the rest of us scratching our heads over stagnating wages.”
The bottom line here, according to Tonelson and Kearns, is that corporate profits are rising at the expense of American workers without any gain in productivity. Tax and trade policy must be changed substantially to advance manufacturing at home, they claim.
Professor Boudreaux exposes the balderdash at work here in his letter. It is follows:
“These authors insist that, because American firms import increasing amounts of component parts for processing into final goods in the U.S., American workers’ productivity really does not rise when more of the work required to produce final outputs is done by foreigner workers,” Boudreaux writes. “This argument is nonsense. If yesterday American workers required two hours to produce an electric drill, and today those same workers require only one hour to produce an identical drill, those workers’ productivity has risen. Whether this higher productivity is the result of importing (rather than producing in the U.S.) more component parts of the drill, or instead the result, say, of a new machine that today produces some parts that yesterday were produced by hand, the result is the same: it requires fewer hours of work by Americans to produce a given amount of output.”
The perspective of free-market economists is desperately needed at a time when America appears to be losing her competitive edge. The proponents of higher tariffs and other interventionist polices are entitled to their views. But there is history here and it would be helpful for readers to become better acquainted with the views of Boudreaux and others who support policy changes that would free the economy.
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