Welcome back to my blog,
I recently came across an article in the New York Time about the idea of measuring productivity in the labour market. As this was so relevant to the theory I was learning in class, I thought I would research this further and share with you some of my findings. Before we being it is useful to define what we mean by productivity, in particular labour productivity. This is essentially, output per worker per unit time. In other words how much one worker can produce in a given period of time. This is useful for a firm to understand where they can cut costs or how they can increase revenue or profit depending on their business objectives. We should also note that capital productivity refers to output by capital products such as machinery and thus it is important not to confuse the two or use them interchangeably .
As things currently stand, it is very difficult to measure productivity in the work place. Although with certain blue collar jobs it is easy to count the number of items produced in a given time period by each worker, there is still asymmetric information. This being the lazy worker who can still get away with distractions, taking too long in the bathroom, fidgeting or making basic errors on the job. To counter this amazon has recently been granted a patent for a wristband, similar to a FitBit which measures worker’s productivity more rigorously, assesses how hard they actually work rather than how hard they claim to work and even nudges you when you place an item in the wrong zone.
This means that firms which have a more productive labour force can produce more with the same output, allowing them to reduce X-ineffcieincy (using more resources than necessary for a given level of output) or to offload unproductive/extra workers who are no longer needed, providing trade unions are not able to challenge the monopsony power that employers may have.
Although we have heard a lot about the gender pay gap in recent times, this is another prime example of wage differentials in action within the labour market. According to the marginal revenue product of labour theory (MRPL), an increase in productivity leads to higher pay for those who are more productive and a decrease in pay for those who are less productive. More productive workers can subsequently demand a higher salary as a reward/incentive for producing more and increasing the profits of the company. This idea is similar to how John Lewis issue all their employees shares to incentives them to be more productive and work hard so that the whole company benefits and thus they receive more in shareholder dividends, except amazon’s band is primarily for very low skill, blue collar work.
Although this sounds like a utopian situation for employers and could allow them to maximise supernormal profits in the long run, it comes at the expense of workers’ privacy and there are a number of drawbacks that should be considered as these could potentially offset some of the benefits of this band.
Firstly in the case of Amazon, they already have a reputation for a workplace culture that thrives on hard-hitting management style which pushes workers to meet delivery targets. This has resulted in many workers feeling undervalued or overworked for the amount they are payed and subsequently may cause employment issue down the line if people can find easier jobs in similar companies which have a different ethos.
There is also the issue that technology today is not 100% reliable and things can go wrong in terms of hacking/tampering or with mis-measurements. This extra layer of surveillance would also result in an envision of privacy as well as employees being treated more like robots than human beings which would lead to lower morale, workers feeling less morale, thus worsening productivity and also people leaving their jobs, creating disruptions to delivery and production lines.
Companies are increasingly introducing artificial intelligence into the workplace to help with productivity, and technology is often used to monitor employee whereabouts. Currently this new band bridges the gap between full scale AI and current workers. In Wisconsin, a technology company called Three Square Market offered employees an opportunity to have microchips implanted under their skin in order to be able to use its services seamlessly. Its only a matter of time before the labour market undergoes a technological epoch resulting in a revolution in the way goods and service are produced. Perhaps the updates version of this news article will consider difference in the productivity of robots or how human capital may soon be redundant. On that note, if you are interested in reading further into the role of automation in the future, I would recommend Susskind’s, ‘The Future of the Professions’, which not only considers who blue collar work is chaining but have professions such as doctors, lawyers, bankers and accountants could be at risk in the near future. He provides a practical and logical scenario using statistical information and ‘big data’ to evaluate the potential effects on society and also raises some key questions about the ethics of using AI.