Category: Productivity

COVID19 and the Economics of Future Work: Exposing More Workers Too Soon May Permanently Damage the Global Workforce

SOURCE ITEMS

They think that the virus may bind to receptors on endothelial cells, which are found on the inside of blood vessels, like veins and arteries. It’s possible that the virus’s presence there triggers an immune reaction to the foreign substance which results in clotting, Morro says—and it’s those clots which, if they travel to the brain, can cause stroke.

Kat Eschner, COVID-19 is causing strokes in young people and doctors don’t know why, Popular Science, April 28, 2020.

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But experts are warning of possible long-term effects for patients after they’ve survived the coronavirus. Doctors know now that the disease attacks many systems within the body — from the lungs and heart to the liver and kidneys, says Yale cardiologist Dr. Harlan Krumholz.

Robin Young and Samantha Raphelson, As Patients Recover From Coronavirus, Doctors Wonder About Long-Term Health Impacts, Here and Now, April 28, 2020

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Overall, 1419 of 1555 patients survived for >90 days, with a mean follow-up period of 5.9 years. There was significantly higher long-term mortality among patients with pneumonia than among age-matched controls.

Eric M. Mortensen, Wishwa N. Kapoor, Chung-Chou H. Chang, and Michael J. Fine, Assessment of Mortality after Long-Term Follow-Up of Patients with Community-Acquired Pneumonia, Clinical Infectious Diseases, Volume 37, Issue 12, December 15, 2003.

COMMENTS

We are all trying to figure out what policy makers should decide about revving up the world economy.  From what I am reading, even the medical experts are not sure what can be resumed safely and what can’t.  As we reopen businesses, the people we are putting at greatest risk are the very people we rely on most to make the world economy hum with success.

One thing we are learning is that young and healthy workers may not be as safe from covid19 as we and they think.  Research is suggesting that while young people may face a much lower death rate, they may be facing long-term bad outcomes from covid19, including strokes leading to long term disability and greater susceptibility to debilitation and death from other disease traumas.  Long after the covid19 infection is a distant memory, working people and the world economy may still be paying the price of increasing worker exposure to covid19 too soon.

The long run costs in health and wealth from revving the economy too quickly may considerably outweigh the short run gains. For workers who survive covid19 infection, the possible lifelong health conditions will be physically painful and emotionally traumatic.  For their families, the expenses and the lost income because of lost work time will undermine economic well being.

The long run costs to the world economy will also be high.   A world economy with a large number of health compromised workers is a world economy with rising expenses (on top of the rising expenses of caring for a growing global population of older people, many with chronic illnesses)and declining productivity.   Caring for chronically health compromised workers diverts public wealth (both taxes and contributions to charities) away from funding critical investments and funding public goods that enhance the quality of life.  Workers with compromised health are off work more often and are less productive when on the job.

In a nation like the U.S., with an aging population and dependence on the output of workers in other parts of the world, the consequences will not be good.  Not only our own workforce will be health compromised, but also the global workforce that we have come to rely on.  The productivity of workers in the poorer nations that produce so much of what we consume will have very high rates of covid19 infections now and much lower productivity going forward.  Moreover, replenishing the U.S. workforce with healthy young workers from other parts of the world as our workers age out of the workforce will be more difficult and costly.  In such future circumstances the likely economic trajectory for the U.S. is a downward spiral – less wealth to pay for health; less health to create wealth.

Supply Chains, Productivity, and Economic Growth: The Global Context for Understanding U.S. Employment Growth

SOURCE ITEMS

Canada’s gross domestic product contracted for a second quarter in the three months through June, a Sept. 1 report will show, according to almost all economists in a Bloomberg survey. The economy probably shrank by 1 percent, even worse than the 0.6 percent first-quarter drop.

“When Canada hurts, U.S. exporters do, too,” Bricklin Dwyer, an economist at BNP Paribas in New York, wrote in an Aug. 27 note to clients titled “Canada (not China) matters more.”

Jeanna Smialek, Uh-oh, Canada. China Pales as a Risk to U.S. Growth, BloombergBusiness, August 28, 2015. Accessed August 29, 2015.

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Moody’s Investors Service has revised downward its forecast for GDP growth in the G20 economies to 2.8% next year, from 3.1%. Moody’s says that the revision mainly reflects the impact of a more marked slowdown now forecast in China and more prolonged negative effects of low commodity prices on G20 producers than earlier expected.

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Moody’s has slightly revised downwards its GDP growth forecast for China in 2016 to 6.3%, from 6.5% previously. Recently published economic indicators show that China’s slowdown in exports and investment has continued into Q3 2015. In addition, signs that employment growth is weakening point to a more marked and broadly-based deceleration in the Chinese economy than previously expected.

Moody’s revises forecast for G20 economies’ growth downwards to 2.8% in 2016, Press Release, Moody’s Investors Service, August 28, 2015. Accessed August 29, 2015.

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International production fragmentation, in which manufacturing or services activities done at home are combined with those performed abroad, has now taken centre stage. This represents a major point of departure from the so-called “Fordist” production system – exemplified by the American automobile industry – where all economic activity was organised within a single firm located on one site or in close proximity (Feenstra 1998).

Increasingly, firms across advanced and developing countries add value along these global supply chains by completing a specific task associated with the production of a finished product and then exporting it. This may be an important part or component required in the production of a good. It may even be a service that is a vital intermediate input in further production.

Albert Park, Gaurav Nayyar and Patrick Low, Supply Chain Perspectives and Issues: A Literature Review, Part I, World Trade Organization, 2013. Accessed August 29, 2015.

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I prefer to date the slowdown in productivity growth from the end of 2010 because productivity growth (in the nonfarm business sector) averaged a bountiful 2.6% per annum from mid-1995 through the end of 2010, but only a paltry 0.4% since. Other scholars prefer earlier break points. For example, productivity growth averaged 2.9% from mid-1995 through the end of 2005, but only 1.3% since.

Either way, the drop is large, and the scary thing is that we don’t understand why.

Alan S. Blinder, The Mystery of Declining Productivity Growth, The Wall Street Journal, May 14, 2015. Accessed August 29, 2015.

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In advanced economies, where plenty of sectors have both the money and the will to invest in automation, growth in productivity (measured by value added per employee or hours worked) has been low for at least 15 years. And, in the years since the 2008 global financial crisis, these countries’ overall economic growth has been meager, too – just 4% or less on average.

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Hence the question on the minds of politicians and economists alike: Is the productivity slowdown a permanent condition and constraint on growth, or is it a transitional phenomenon?

Michael Spence, Automation, Productivity, and Growth, Project Syndicate, August 26, 2015. Accessed August 29, 2015.

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This paper offers an integrated analysis of outsourcing, offshoring, and foreign direct investment within a systems view of international business. This view takes the supply chain rather than the firm as the basic unit of analysis. It argues that competition in the global economy selects supply chains that maximise the joint profit of all the firms in the chain. The systems view is compared with the firm-centred view commonly used in strategy literature. The paper shows that a firm’s strategy must be embedded within an efficient supply-chain strategy, and that this strategy must be negotiated with, rather than imposed upon, other firms.

From the Abstract, Mark Casson & Nigel Wadeson, The Economic Theory of International Supply Chains: A Systems View, International Journal of the Economics of Business, Volume 20, Issue 2, 2013. Accessed August 27, 2015.

COMMENTS

Most economists explain a slowdown in a nation’s economic growth in terms of stagnant productivity growth. Yet it is seriously questionable whether such a thing as the productivity of a nation is a meaningful statistic at this late date in the development of the world economy.

Global supply chains now distribute production processes across multiple nations. Even the local bakery is, even if unwittingly, often part of supply chains that transcends national borders. The development of the global supply chain system has reached such a level of maturity that some researchers argue that the supply chain, not the individual firm, is the key competitive unit in the world economy.

The implications for measuring productivity seem obvious. If the competitive unit is a supply chain, then it is the productivity of a supply chain as a whole that is relevant to economic growth. If supply chains cross national boundaries, then measuring the productivity of only the part that is within a national boundary will obscure the positive or negative impact on total supply chain productivity of the “foreign” firms in the supply chain. The competitive position of the supply chain will not be correctly understood.

In the aggregate, measuring the productivity of a nation’s firms rather than the productivity of the supply chains in which the nation’s firms operate will lead economists and policy makers to misunderstand their nation’s prospects for economic growth. That, in turn, will lead to misguided expectations about employment and wage growth.