Productivity surges as jobs vanish, Effect both positive and negative
It's 6 a.m., and UPS package loader Shane Picklesimer is popping in and out of the company's brown delivery vans like a prairie dog.
Humming conveyor belts push a seemingly endless cascade of boxes and envelopes toward Picklesimer as he and 130 co-workers at the UPS package center in Roswell struggle to keep up. Within an hour, about 185 trucks will roll out of the building on routes that will take them throughout Atlanta's northern suburbs.
It's heavy, gritty, physical labor that seems virtually unchanged from the way Teamsters went about their jobs a decade ago, or even a generation ago. But these UPS workers are at the forefront of a productivity surge that helps explain why the U.S. economy has been growing steadily in recent months while shedding jobs.
Productivity is the measure of how much is produced per worker per hour. The more efficient a company — or the economy as a whole — the fewer hours needed to churn out a product.
It has both a shiny upside and a rough, dark downer.
Economists are fond of saying that, in the long run, the nation's standard of living depends on productivity growth. But it is the short run that worries working people — the idea that efficiency lets companies shun hiring.
Yet productivity gains can also be good news for those who are on the payroll because they can make the business healthier.
On this morning, Picklesimer will load five UPS delivery vans by himself — he used to load three during each morning shift a year ago. The difference, he says, is a computer system that tells loaders where to put each parcel on each truck so that they can be delivered in an exact sequence.
"When I started working here, it took me six months to learn all the addresses on each route so that I could load all the packages in the right order," said Picklesimer, 29. "The new system takes about half an hour to learn. A new hire can load trucks on his first day."
Picklesimer earns $10 an hour during shifts that begin weekdays at 3:40 a.m. and end at 8:30 a.m. He isn't paid any more for loading the additional trucks. But he says he doesn't mind the extra hefting because the new method is so much simpler to understand and less prone to errors.
"The new system takes away a lot of the stress from the job," he said. "I can do more work and actually have a better day."
That feeling isn't shared by all UPS employees, or by workers in other industries who have found that demands for greater productivity bring longer work hours and greater demands without corresponding pay increases. But a look at two Atlanta companies — traditional UPS, the world's largest delivery firm, and SecureWare, a 65-employee Internet company — reveals some of the ways U.S. businesses are doing more with fewer workers.
Using technology
At street level, the daily operations of the 96-year-old delivery firm seem remarkably consistent.
Brown-shirted drivers steer the same boxy trucks as their predecessors, and they work about the same number of hours in a typical shift.
"You can't drive any faster, and you can't work any harder than our drivers already work," said Cal Darden, UPS senior vice president for U.S. operations. "But you can use technology to dramatically increase your efficiency — and that's what we're doing."
At the UPS hub in Roswell, the process starts about 11 each night when dispatchers plan the next day's deliveries using computer programs that optimize the loads for all 185 delivery trucks. The system also prints labels that show loaders where to place each package by truck, shelf and order.
"The label says a package is going to the fourth car, on this shelf and in this position," Darden said. "We've taken the skill out of the job. We're using fewer people to load the same number of cars."
Dispatchers "balance" loads between cars so that each one has about 120 stops during the day. If one route is particularly heavy, overloaded vans show up in red on computer terminals so that dispatchers can make adjustments before the vans are loaded. Such changes used to require manually unloading and reloading vans and losing precious time.
By 7 a.m., most of the drivers have arrived, and computerized clipboards show them the exact order in which to deliver their packages. Future versions of the computerized clipboard will contain links to Global Positioning System satellites so that dispatchers can continuously monitor the position of each truck throughout the day.
Greg Law, 43, a veteran UPS driver, said the clipboard system is nearly foolproof.
"This job is hectic, and we have a lot of work to do," said Law, a UPS driver for 19 years. "I was here when we had to fill out papers for every delivery: every shipper number and every address. Now, all that's been replaced by scanning a bar code. No one wants to go back to the way things were."
Law covers a commercial area near Mansell Road in Alpharetta and makes about 90 stops a day, delivering about 450 packages.
Among UPS' 55,000 full-time and 5,000 part-time drivers, Darden said, recent technology innovations have added about half a stop each hour to the 14.5 hourly stops UPS drivers typically make during a nine-hour shift. Tests on a number of vans also showed that mileage fell to 30 miles per driver per shift from 38.
"We think we can add another full stop per road hour," Darden said. "This is just the tip of the iceberg."
Future productivity increases and greater volume makes for higher "delivery density" and geographically smaller routes.
"Our plan is to need less package car drivers for more volume. We're not laying people off — but we won't have to add as many people as our volume increases."
Erratic numbers
Productivity's progress has been erratic.
Last year, it surged by 5.4 percent — the quickest acceleration since 1950. But gains were less than half that for each year back to 1992.
Five of the past 11 quarters have seen productivity surging at better than a 5 percent clip. But some economists are reluctant to embrace that surge as remarkable.
Despite a burst here and there, average productivity has been only a bit better than after recessions of the past, said Dean Baker, co-director of the Center for Economic and Policy Research.
"It's not a radically different pace of productivity growth. What is new is that you haven't had jobs."
But blaming productivity for the weak job market is misguided, argues economist John DiNardo of the University of Michigan.
Productivity was high in the late 1990s when joblessness hit historic lows. It has often surged after past recessions as the economy was clicking into high gear — with hiring at high speed, he said. "I don't think there is any correlation between the unemployment rate and productivity."
Even if productivity gains are real, they don't necessarily mean job cuts, DiNardo said.
A company with higher productivity might instead churn out more products or cut prices. It also could pay its workers more, he said. "Productivity is more like a choice that people are making as opposed to something that is happening to them."
"Every CEO in the country is trying to operate as efficiently as possible," said Rick Cobb, executive vice president of Challenger, Gray & Christmas, which tracks work force trends.
But the choices have been better for companies than workers, said economist Laryssa Mykyta of the Alice Paul Center at the University of Pennsylvania.
During the past three decades, productivity has soared 82 percent while corporate profits climbed 39 percent. At the same time, inflation-adjusted hourly pay nudged up just 0.2 percent and the [inflation-adjusted] minimum wage dropped 38 percent, Mykyta said.
"Productivity growth gives you room to do both things — to increase wages and keep inflation low," she said. "I do think increased productivity has the potential to increase the standard of living in society."
Efficiency is often a matter of having better tools.
For business during the past decade that meant technology, as the United States started to make massive commercial use of advances that started years earlier, said Barry Bluestone, director of the center for Urban and Regional Policy at Northeastern University.
Three decades ago, government money poured into science and defense. That spending led to the Internet and integrated circuits, which in turn were key to dramatic innovations in software and computing, Bluestone said.
"There are real productivity gains. They are not fictitious. They have permeated all sorts of industries. Last year we had the fastest productivity growth since 1950."
Intense focus
A flashing red message blinks across the electronic bulletin board, warning of a potential problem affecting one of SecureWork's 500 clients.
Immediately, one of four computer technicians at the company's operations center begins tapping on his keyboard to find out whether the client's computer system is simply down for maintenance — or if it's under attack by hackers.
It takes only a few seconds to determine the problem is benign, and the technician soon moves on to a similar warning for another client.
"We get a surge in activity from Europe every evening and from the Pacific Rim in the morning," said Craig Bray, operations director at SecureWorks, a 4-year-old Atlanta Internet security firm with headquarters and operations in northeast Atlanta.
"Most of them are inexperienced hackers. Latchkey kids who try to create a little havoc for a few hours after school until their parents get home. Others are a lot more sophisticated."
SecureWorks was founded near the height of the Internet boom with $30 million in venture capital. But it has survived and grown in part through a ruthless focus on productivity.
The company had significant upfront costs to get its data center running and staffed around the clock with technicians and Internet security experts. But now that the infrastructure is in place, SecureWorks can expand rapidly without adding employees or other costs.
"We can triple in size and only add a handful of bodies," says Jeff Multz, vice president for sales. "We've survived through some very tough economic times because we've been forced to be efficient."
SecureWorks expects to collect about $10 million in sales this year, and Multz says the company is adding between 30 and 50 clients a month. Fees range from $8,000 to $100,000 a month for customers that include major banks, savings and loans, utilities and health care companies.
SecureWorks' motto says the company can block hackers without increasing a client's "headcount," and it is similarly focused on its own costs.
"A lot of the so-called new economy companies of the Internet boom liked to talk about scalability — but many of them failed because they couldn't deliver it," Multz says. "We survived the really tough times and we'll prosper in the future because of our absolute commitment to efficiency."
