Diane Monaco wrote:
Would have little impact on which productivity figures, Doug? If foreign labor inputs are "displacing" domestic labor inputs, and domestic labor inputs are counted in domestic productivity figures, wouldn't there be an impact on domestic productivity figures?
(domestic labor productivity)=(domestic output)/(domestic labor input)
...so if "domestic labor input" goes down and if domestic output stays the same or increases...then domestic labor productivity will go up.
If the work is done abroad the value added is counted as part of foreign, not domestic, output. The foreign labor would be embodied in purchased components.
True, in a perfect world. But the foreign labor inputs used, should technically be "subtracted" from domestic value added as imported intermediate goods inputs, as Jim D. more accurately detailed above, although it is always understated, thus overstating domestic output (domestic value added). So when domestic value added, if you will, is overstated and domestic labor input falls, domestic labor productivity rises. Imported intermediate goods inputs are understated because the work that is outsourced to contractors, is typically further outsourced to subcontractors and other unidentifiable brokers, jobbers, etc. along the way -- and the actual value is lost and hidden.
Diane
