by Wendell Cayton

I grew up in the central Washington town of Yakima, which calls itself the “fruit bowl of the nation.” Like most youngsters there, I worked every summer in the fruit business, irrigating, gathering and swamping picked fruit from the orchards.

Eventually, I worked up to a job in the packing plants that employed hundreds, if not thousands, of seasonal workers. I vividly recall the long lines of conveyor belts of fruit that had to be sorted, graded and finally packed into boxes, all by hand . . . by hundreds of hands.

Last week, I saw what advances in productivity have done for this industry. I toured the Wenatchee, WA, manufacturing firm of Van Doren Sales, Inc., which designs, fabricates and installs the equipment that now takes the place of most of the hands—and jobs—I remember from my packing plant days.

President Bret Pittsinger explained to our group how fruit is now washed, sorted by size and packed, all by machine. If you have ever wondered how all the apples in the store got their stickers, chances are one of Bret’s machines put them there. There is even technology for testing firmness and sweetness when grading. It’s a long way from the manual packing operations of my youth!

The productivity in this industry is just one small reason why we enjoy a growing economy with low inflation. Recently released government statistics show overall productivity increasing 5.5% over the last twelve months, matching the fastest productivity gains in thirty-one years.

According to a report by USA TODAY® (6/13/04) that studied the productivity of the 100 largest companies in the U.S., our country is on a multi-year productivity surge, the likes of which have not been seen since World War II.

One example the report pointed out was the McKesson Corporation. This giant distributor of pharmaceuticals to hospitals and drugstores has worked hard to increase productivity, either by doing work with machines or finding better ways to do things by hand. The results are astonishing: Last year, it sold $7 billion more product than in 2002 and did it with only 500 more workers. That works out to an increase of over $14 million per worker added!

A number of other examples were cited in the report. Lockheed Martin’s productivity improvements have allowed it to produce a cruise missile for $400,000 instead of $2 million. Aircraft startup Eclipse Aviation reports that it expects to start producing small private jets for around $1 million, compared to the $2.3 million cost for current bottom-of-the-line models.

Technology and competition continue to be the driving forces behind such gains. We’re learning how to do more with less. Our products and services are becoming more competitively priced. All of this adds to the economic growth our nation needs to be healthy, but there are clouds on the horizon.

The rapid gains we have seen may be slowed by several factors. First, the Internet, and more specifically email, has made us all more efficient. But the rise in junk mail and Internet-transmitted viruses are costing businesses money. Market researcher Nucleus Research found that the avalanche of junk mail and viruses cost American businesses $15 billion in personal losses and lost workplace productivity last year. Symantec™ research indicates that about 40% of small businesses would consider discarding email for business correspondence if spam worsens.

Second, rising productivity and increased competition is causing the U.S. to lose lower-paying jobs to outsourcing. This is not politically acceptable to some. Movements to thwart such outsourcing by taxes or other restrictive means should help stifle competition and contribute to rising prices and rising inflation.

However you evaluate it, increased productivity is certainly a force to be reckoned with.