Thursday, May 18, 2017

Unskilled Labor Destroys Productivity

Sailer finds another mistake in the mainstream financial press: Oops ...
Productivity in [U.S.] construction has contracted at a 1% annual rate since 1995, according to a study by McKinsey Global Institute, the research arm of McKinsey & Co., due in part to reliance on unskilled workers and in part to government red tape.

Joel Shine, chief executive of builder Woodside Homes Inc., visited Kyoto, Japan, to see how firms there use automation in home construction. He thinks it would take at least a decade for the innovations to become mainstream in the U.S., in part because they would require building-code changes.
The most simple model of capitalism is a man on an island. He can catch enough fish and coconuts during the day to stay alive. However, if he takes time to make a spear, he could catch more fish. Since his spear making will take several hours, he works extra hard to catch more fish and coconuts one day, eating the surplus while he makes his tool. Now he can generate surplus everyday, and he starts drying fish to preserve them. Then he realizes with a net he could catch enough fish in one day to feed himself for a month, and then he can dry them for a day, and have the rest of the month free. And then he'd have time to build a nice shelter instead of living under a lean-to...

Create extra resources so you can build better tools, to create even more extra resources and build even better tools. Productivity goes up and wages follow. Constraining labor supply forces greater investment in capital (including intellectual), easing labor supply retards capital accumulation and capital investment.

Leave out debt and all the other complexities of a modern economy. At he most basic level, unskilled/low-skill immigration and the economic arguments in favor of it are retarded. The only time it might make sense is when there is a capital surplus, a dearth of labor AND capital investments in productivity will take time (wages would be high and rising rapidly). And then it would only make sense to use temporary guest workers who can accelerate productivity gains (such as rebuilding highways after the war in Germany), workers who are sent home after their term of service.

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