Word: honestus
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CONFUSA: What makes productivity go up? HONESTUS: The most important factor is new machinery and equipment. Other factors enter in, including higher levels of education and skill among workers, more efficient means of transportation and communication, research that pays off in new products or new techniques...
CONFUSA: What has productivity got to do with wages? HONESTUS: In recent years, productivity has come to be widely accepted as a yardstick for measuring the reasonableness of union demands for higher wages and fringe benefits...
...HONESTUS: Well, let's take an imaginary steel company producing $100 million worth of steel a year. Say its labor costs-wages and fringe benefits together-add up to $40 million a year. Now, say productivity goes up 2.5% and the workers get a 2.5% increase-whether in wages or fringe benefits doesn't matter. The total output goes up to $102.5 million, or $2.5 million more than before. Labor costs increase by 2.5% of $40 million, or $1 million. That leaves an extra $1.5 million to be distributed between nonlabor costs and profits. So profits would increase...
...HONESTUS: No. The labor costs per ton of steel would remain the same as before. The wage increase would be what is called "noninflationary." CONFUSA: Why doesn't everybody accept productivity as a guide for wage increases and stop all the arguing? HONESTUS: That, in effect, is what the President and his Council of Economic Advisers are advocating. But in practice, the yardstick is not so easy to apply. You can't just take that average figure for national productivity growth over the past half-century and apply it to every situation-changes in productivity vary greatly from...
CONFUSA: How about the latest steel contract, signed a few weeks ago? Was that in line with productivity? HONESTUS: It added 10? an hour, or 2.5%-in line with the standard figure for yearly productivity gain. The settlement that Vice President Nixon helped to arrange in early 1960 after the long steel strike added about 40? an hour, but even that boost has been pretty well balanced by productivity gains...