Big lies, little lies, & statistics

There’s a retirement crisis facing older workers. The bosses tell us they can’t meet pension obligations because there are too many retirees and not enough active workers. They use the same argument to explain why they have to gut or privatize Social Security.

People tend to believe them when they say things like, “There were four active workers for every one retiree when we started this pension plan, but now there are only two active workers for every retiree, so we’re just not getting the income needed to meet these retirement obligations. It’s just a question of demographics.”

The whole approach is a lie. Here’s why: they assume that the output of one active worker in some previous year equals the output of one active worker today. The truth is that a worker today produces a great deal more wealth for his or her boss than a worker produced previously.

I asked the Bureau of Labor Statistics for labor productivity increases since 1938, but all they had were the figures for 1947 to 2003. That is more than enough to show what I mean.

The BLS numbers reflect “dollar value produced per hour” by workers in the private sector. Look at the table below. If we use 1947 as a baseline year for worker output, assigning it a productivity index of 100, by 1967 that figure almost doubled to 193. In other words, each worker hour yielded nearly twice the dollar value of what a worker produced 20 years before.

Note that by 2003, the labor productivity index had quadrupled! An hour of work in 2003 created as much dollar value, adjusted for inflation, as four hours of work in 1947.

Incidentally, the big difference comes primarily from automation, but some of it comes from improvements in methods of work and from a better educated and more highly skilled workforce.

No matter where it comes from, the effect is the same: one hour of work today produces about four times as much wealth as one hour of work in 1947. When the bosses tell us the value of an hour is the same, they are lying. The money to fund pensions and Social Security is available, and will continue to be there for some time to come.

Douglas Orr, writing in the current issue of “Dollars and Sense,” makes much the same point: “The ‘demographic imperative’ ignores productivity growth. Average worker productivity has grown by about 2 percent per year, adjusted for inflation, for the past half-century. That means real output per worker doubles every 36 years. This productivity growth is projected to continue, so by 2040, each worker will produce twice as much as today.”

Orr asserts that the increasing amount of value produced will be more than sufficient to ensure that “the incomes of both workers and retirees [will] go up. Thus, paying for the baby boomers’ retirement need not decrease their children’s standard of living.”

One last point: A quick glance at Juliet B. Schor’s wonderful book titled “The Overworked American” shows that U.S. workers are working more and more hours each year, generating value — what Karl Marx called “surplus value” — for their employers. From 1969 to 1987, she points out, the annual working hours of a U.S. worker rose, on average, by 162. Capitalists were just getting started at driving American workers harder in 1987; it’s certainly more than 162 hours now.

The prediction for working hours in 2005 has to be even larger, because President Bush has just removed overtime pay protection from millions of American workers. They’ll still be getting overtime, just not overtime pay. The number of hours worked will continue its sharp ascent, as will company profits.

So don’t believe the bosses’ lies. Organize and defend what’s yours.

Year Dollar value produced per hour

1947 100

1957 139

1967 193

1977 242

1987 279

1997 329

2003 400