Kathleen Madigan writes
In the man-versus-machine competition, machine is winning. And it’s not just Watson beating humans on “Jeopardy.”
Since the recession ended, businesses had increased their real spending on equipment and software by a strong 26%, while they have added almost nothing to their payrolls.
This kind of reasoning is tempting. The President even seemed to succumb to it when he suggested that ATM were taking bank teller jobs.
However, the chart above confuses stocks and flows. The size of the labor force is a stock while investment spending is a flow.
If we look at the change in payrolls, just like investment is the change in the amount of equipment, we get very similar lines across the period in question.
If we want to do a proper index, then we are going to have to go back to Though, I think you get a better picture if you look at the whole recession.
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Friday ~ September 30th, 2011 at 9:00 am
jpersonnaj
Does the WSJ chart use same-units for both spending and hiring (changes in dollars)?
How do you choose the right hand graph divisions, for thousands of persons, to properly scale the two investments?
Saturday ~ October 1st, 2011 at 12:42 am
Tel
Payroll is measured in units of dollars per annum, investment spending similarly is measured in units of dollars per annum. Thus, I conclude they are comparable values.
Besides, regarding labour force as a stock is in complete disregard for the normal concept of stock. After all, you cannot sell off labour force to raise revenue, and when a firm hires a new worker the initial expenditure on day one is zero (you don’t purchase the worker, well not in modern times anyhow).
What I want to know… who is writing all that software?
Saturday ~ October 1st, 2011 at 12:51 am
Karl Smith
Suppose your payroll was 100 workers per year. Suppose your investment was 10 trucks per year.
Even if your payroll and investment were constant the structure of your business would change over time because you would accumulate more and more trucks and thus the number of trucks per worker would rise.