The Efficient Economy

Productivity is one of those tricky measurements that make it sound as if men are working harder and harder, when in fact machines may simply have replaced so many people that the work ers left seem more efficient. At any rate, the economy is enjoying a remarkably prolonged rise in productivity. Business men do not like to boast about it open ly, lest unions ask for higher wages or shorter hours, but industrial productivity has been rising some 3.5% annually dur ing the current, 29-month-old upswing in business -- far above the nation's long-term average gain of 2.2% a year.

PACE & Processes. A host of new processes that save on manpower, materials and money have produced countless efficiencies. In the stockyards of Chicago and Omaha, steers are turned into sirloins aboard conveyer belts that help packers to process 70 cattle an hour, compared with 40 a few years ago, and to do the job with 60 men instead of 150. Jones & Laughlin oxygen steel furnaces in Cleveland recently poured 491 tons of steel in one hour, compared with 60 tons for a similar-sized open hearth shop. Last week Reynolds Metals Co. announced that it had developed a laboratory method of turning bauxite into aluminum without first reducing it to alumina powder,* and that other revisions in its existing production lines will enable it to increase production more than 21% on demand.

Expanding its plant at Cumberland, Md., Pittsburgh Plate Glass is setting up a "float process" that will produce high-quality plate by floating molten glass on a pool of molten tin. Since the process requires no expensive grinders, buffers or polishers, the company will be able to double productive capacity by adding only 100 men to its current work force of 700.

Besides automation, engineering advances have enhanced productivity. Engineers at Ford have devised a means of changing dies on stamping presses within minutes during a model run. Printed circuitry and other advances have cut the labor on a television set by 22% in the past five years, even though those technical breakthroughs have increased the bewilderment and helplessness of TV repairmen. Motorola reckons that it has increased the productivity of its white-collar workers as much as 20% by giving them output standards to meet. In a popular new system called PACE, developed by Northrop Corp., inspectors wander through work areas recording what each employee is doing at any given moment and clocking time spent.

This has shown that much time and labor go into things such as fetching supplies that are not reckoned as part of the job. PACE is widely used by defense contractors, who figure that so far it has saved them $107 million.

Problems & Prospects. Increased productivity helps explain relatively stable prices and declining labor costs in a time of economic growth. U.S. Steel's labor costs per ton of steel shipped in 1962 were the lowest in three years. But the increase in labor efficiency also adds to the nation's problem of unemployment --which rose to 4.8 million job hunters last month. A decade ago, one new job was created with every $10,000 gain in the gross national product; now the increase has to be more than $30,000.

Some economists expect that productivity will continue to rise faster in the 1960s than in the 1950s. Business capital devoted to more productive plants and machines is increasing at an amazing rate of 4% a quarter, next year is expected to reach a record $44 billion.

While this increase is gratifying to economists, many businessmen say that spending more for productivity eliminates almost as many jobs as it creates.

* Similar methods also have been developed by Canada's Aluminium Ltd. and France's Pechiney.

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