Saturday, June 11, 2011

Man-machine argument explains the slow job recovery

Catherine Rampell in the NYT Economix blog presents a good argument for the slow job recovery called Man vs. Machine. The change in aggregate spending on equipment and software far outstrips the the spending on labor compensation, 25.5% to 2.2%.

From the second quarter of 2009, total compensation costs have risen by over 3% while equipment and software prices have declined by over 2%. The key increase in costs has been benefits. This is still associated with health care costs.

Why hire workers with the costs rising when you can buy cheap equipment and try and increase productivity. Worker costs have to be brought under control but this is also one of the great political problems. Government is often driven by support of workers not by trying to control their costs. The government has to provide costs solutions in order for businesses to hire more.

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