1947 48 49 50 51 52 53 54 55 56 57 58 59 60 61 62 63 64 65 66 Year FIGURE III-1. Value Added Per Production Worker Man-Hour, Tool and Die and Selected Customer Industries (Constant Dollars, 1957-1959 $1.00). Source: Appendix C, Table C-11. = Constant dollar output deflated by the Consumer Price Index, 1957-59 Productivity, which measures man-hour output, has two components: the increase in product prices and the increase in actual units of output which a worker can produce per hour. It is possible for physical productivity to rise rapidly, yet be understated in output per man hour indices because of less than average price increases. This has happened, for example, in agriculture. However, it is probable, but not certain because of insufficient data, that price increases in the tool and die industry have been greater than the national average. The prices of metalworking machinery and equipment, the industry group to which the tool and die industry belongs, increased much faster than the consumer price index used to derive the figures in Table III-8. Between 1950 and 1965, the purchasing power of the dollar fell 23.8%; the value of the dollar deflated by metalworking machinery and equipment prices fell 44.1%. If tool and die prices increased at roughly the same rate as those for metalworking machinery-a reasonable assumption since one-third of metalworking machinery output comes from the tool and die industry-real man hour output would have fallen by approximately 9%. However, even without that assumption, increases in productivity have been small. One of several possible reasons that physical productivity has failed to rise is the lack of improvement, or even deterioration, in the quality of 3 U.S. Department of Labor (Bureau of Labor Statistics), adapted from U.S. Bureau of the Census, Statistical Abstract of the United States: 1966, pp. 351 and 353. the labor force. The tool and die labor force is, of course, highly skilled; but during the recent boom greater use has been made of less productive apprentices and marginal workers, tending to lower average worker productivity. A second possibility is that capital per worker has failed to increase as rapidly as it has in the rest of the economy. Since output is the product of the joint use of capital and labor, an increase in the quality of capital per worker should produce an increase in the output per worker. The meager data which exists seems to indicate that tool and die investment has not lagged far behind the national average for all manufacturing. The most compelling reason, however, would seem to be a lack of improvement in the quality of capital-a lack of technological progress. While most segments of American industry have modernized capital plant, most tool and die firms have not. The resulting low rate of increase in productivity stems from a paucity of technological improvement, both mechanical and managerial. Without discounting the role played by non-technological elements, this study investigates changes in the technological base and their effects on productivity. Chapter Four FACTORS AFFECTING TOOLMAKING INNOVATIONS While temporary fluctuations in productivity emanate from a variety of factors, including output, scale of operations, and rates of capital investment, the more enduring trends in an industry grow from improvements in the various technological methods for converting resources into goods and services. Even when technological change is defined broadly to include management innovations, a compilation of such changes discloses a sluggish pattern comparable to that of the industry's productivity gains. Several factors can be isolated which impede technological change in the tool and die industry. PECULIARITIES OF DEMAND AND OUTPUT Historically, both the cyclical fluctuation in demand for tools and dies and the difficulty in standardizing products for long production runs have restricted the introduction of advanced toolmaking equipment. Periods of intense activity in the industry are usually sandwiched between periods of recession, neither of which spur technological change. Basic changes in manufacturing methods are unlikely when an industry is operating near capacity because the heavy demands on existing production facilities during these times are too great to permit the interruptions necessary for process changes. In worse times, reduced orders and the uncertainty of future markets dissuade a small business from gambling its limited working capital on costly new equipment. Ambitious technological changes are most likely to occur when business is operating near 75% of capacity and has expectations of growing markets.1 The impact of fluctuating demand is especially formidable when the cost of an advanced toolmaking machine equals a large portion of the firm's net worth. The owners of such firms must be extremely cautious in purchasing so expensive an innovation. Product standardization is uncommon in the Michigan toolmaking industry where the demand is for a variety of metal parts, usually in very small quantities. The scarcity of short-run production is one of the major differences between an actual tool and die firm and a contract machine company. The highly specialized processes of Michigan firms are not easily adapted to new technologies developed for the more repetitive 1 See Edwin Mansfield, "The Speed of Response of Firms to New Techniques," Carnegie Institute of Technology, 1963. |