Speeches by Secretary Elaine L. Chao

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Remarks Prepared for Delivery by
U.S. Secretary of Labor Elaine L. Chao
AEI Conference
The Benefits of Increased Productivity Growth for Workers
Washington, D.C.
Wednesday, February 25, 2004

Thank you for that kind introduction, Chris [DeMuth, President of AEI].

First, let me recognize Diana Furchtgott-Roth, Chief Economist of the Labor Department and Karen Czarnecki, Director of the 21^st Century Workforce Office, for all their work with AEI on this conference. And my thanks also goes to Kathleen Utgoff, Commissioner of the Bureau of Labor Statistics, for her participation.

And thank you American Enterprise Institute for convening this conference. I am so pleased to have the opportunity for the second time to address an AEI conference on the important issue of productivity.

Those of us who work on economic development and workforce issues need to understand as much as possible about productivity growth. That’s particularly important for the Labor Department because its focus is on the human side of the productivity equation—that is, its impact on jobs and workers.

Productivity growth, even with its challenges, pays dividends for workers. The most obvious way that high productivity benefits workers is by increasing wages. As workers produce more, companies can afford to pay them better. That’s why real earnings—earnings adjusted for inflation—have gone up over the last several years. That’s in stark contrast to past recessions, and even some recoveries, when real wages for workers have declined.

And higher wages are only part of the picture. Real compensation—total salary including benefits—has risen 5.7 percent since 2000, according to the Bureau of Labor Statistics Employment Cost Index. That’s even more than the 2.5 percent increase in real hourly wages of production workers.

Higher wages are not the only benefit that workers reap from productivity growth. High productivity also attracts foreign investment—and that means more jobs for American workers. As Americans produce more goods and services per worker than anyone else in the world, foreign companies are more interested in investing in the American economy.

In the current economic debate, too little attention has been given to the number of jobs added on our soil through foreign direct investment. Foreign companies employ about 6.5 million workers in the United States. The high productivity that makes America’s workforce so attractive is one of the main reasons for this foreign investment.

Rising productivity also means that employers can produce goods and services at a lower cost. That means lower prices for consumers.

All together, these benefits translate into a higher standard of living for American workers and their families. When wages are high and prices are low, workers can purchase more goods and services and better provide for their families.

That’s beneficial in and of itself. But standard of living cannot be measured simply in terms of the goods and services we can purchase. It is also measured in how much time people have available to do the things they love, with the people they love. In other words, hours not spent on the job are also important to quality of life. Because of rising productivity, workers can spend less time working and still earn more money and purchase more goods and services.

Here is an example, using a common household purchase. In 1971, the average worker had to toil for 174 hours—or more than 4 weeks—to pay for a standard 25-inch color television. Today, productivity has helped to slash that by 80 percent—the average worker can purchase a standard 27-inch high-definition television for 4 days, or 32 hours, worth of work.

Producing more in less time is the surest way to keep raising our standard of living. It’s the win-win-win of productivity growth: higher wages, lower prices and more leisure time. That’s why productivity growth is critical to maintaining and increasing the standard of living and quality of life for American workers.

But we must never forget those who are struggling with the dislocations created by the inevitable fluctuations of our dynamic economy. That is why job creation is the number one focus of the President and everyone on his economic development team.

And that’s why President George W. Bush’s six-point plan to keep the economy moving forward is so important. The President’s plan will help remove the obstacles to job creation. It will make health care costs more affordable, reduce junk lawsuits that are sapping capital for job creation, ensure an adequate energy supply, reduce job-crushing regulation, open new markets and make the tax cuts permanent.

Our country’s economy has turned the corner and is getting stronger and stronger every month. The nation has had five straight months of job creation. And the unemployment rate, at 5.6 percent, is the lowest in two years. In fact, that is lower than the 5.8 percent average unemployment rate during the 1990s. But President Bush will not be satisfied until every American who wants a job can find one.

By removing the major obstacles to job creation, President Bush’s six-point plan will put America firmly on the road to full economic recovery.

While we’re on that road, the president is committed to making sure that American workers are prepared for the jobs that our dynamic economy is creating. That’s why his budget provides $500 million for the Jobs for the 21^st Century Initiative. That’s in addition to the $15 billion in public employment and training programs already in place to help workers find jobs and gain the skills to move up the economic ladder. The President’s new initiative will identify the industries where new jobs are being created and train workers for these opportunities.

The technology that is helping to drive our robust productivity growth is changing the way we work and the types of jobs that are available. This Administration wants to ensure that our job training programs are relevant and that workers are encouraged to continually update their skills.

I recently returned from a trip to Washington and Oregon and talked with workers who were graduates of community college-based job-training programs. One young man told us that he lost his job in the California high-tech industry when the bubble burst and moved back home to Oregon. He learned about a special program at his local community college that partnered with a top Fortune 500 information technology company to train workers with skills in short supply. Today, thanks to that program, he is working for that company.

His story—and those of many other workers around the country—is the reason why the Labor Department’s number one legislative priority this year is reforming the public workforce investment system that helps train workers. The goal is to bring this program into the 21^st century so workers can be trained for real jobs in the real world.

That is the human face of the equation, which must never be forgotten in discussions about economic theories and principles.

Since 1995 productivity growth has soared compared with the prior two decades and it has accelerated even more since 2000. How our nation encourages and manages productivity growth will determine the standard of living for American workers—both now and in the future. For that reason, this discussion of productivity is both important and timely. So I want to commend the American Enterprise Institute for, once again, being at the forefront of cutting-edge economic issues and for sponsoring this conference.

Thank you.

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