by Jurgen Brauer, September 2006
Copyright: J. Brauer. No reproduction without permission.

It is common knowledge that American companies and their workers are pretty productive. Productivity can be defined in a number of ways, but economists and politicians often look specifically at labor productivity to learn how much product an hours' work generates. The hope is that, over time, the use of a more highly educated workforce, more sophisticated machinery, and the less wasteful use of raw materials, will produce more and more product per hour of work put in.

Worker productivity in 2004 as compared to 1960 increased by 2.72 times, a nearly three-fold increase in output per hour worked ...

Labor productivity numbers for all U.S. businesses since 1960 – defined as output divided by hours worked – certainly confirms the notion of the productive American worker. Indexed to a common year of comparison, productivity in 1960 was 48.9, in 1970 it was 66.2, in 1980 it was 79.2, in 1990 it was 94.5, in 2000 it was 116.1, and in 2004 it was 133.0. Thus, productivity in 2004 as compared to 1960 had increased by 2.72 times, a nearly three-fold increase in output per hour worked.

... but productivity in agro-business advanced at twice the rate (5 times versus 2.5 times) than nonfarm businesses!

But split the numbers to separate out agro-business from all other lines of business, and the result may shock you. The nonfarm business productivity index for 1960 was 52.0, and for 2004 it was 132.3, an increase of 2.54 times. In contrast, agro-business showed an index for 1960 of 28.6, and for 2004 it was 145.5, an increase of 5.09 times. In other words, productivity in agro-business advanced at twice the rate (5 times versus 2.5 times) than nonfarm businesses!

This, even though employment in agro-business has dropped to only a third of what it was in 1960. Farm-employment then stood at 6.2 million workers. But by 2004, this had fallen to only marginally more than 2 million workers. To say it again: 2 million farm workers produced, in 2004, five times as much per hour worked as did 6 million farm workers in 1960.

Although there are examples of hunger in America, the average American – we all know – is over-fed and overweight. The extra poundage does not come from food imports. To the contrary, American agro-business is a net exporter of food. Yes, we import bananas from Honduras and wine from France, but we also export plenty of food, especially grains. In fact, from 1960 to 2004, the United States has had an agricultural trade surplus (more exports than imports) in every single year! In a word, we ship food away, and still are overweight.

Why is U.S. agro-business so productive? Much of the answer lies in modern science and technology. Take an hour's drive into the countryside and have a chat with the manager of a modern-day, commercial agricultural livestock or farming operation. Veterinary medicine and technology, breeding techniques, seed technology, irrigation practices, field management, and sundry other items all have improved massively since the romantic days when Grandpa and Grandma scratched a livelihood from hoeing the farm. Our image of the farm is still impregnated with dust-bowl movies and John Steinbeck novels – that is, 1930s stuff. Time to wake up – the productivity numbers tell the story.

A puzzling question however concerns agro-business gross incomes. Between 1960 and 2004, they increased by a factor of 4.5 per farm worker (adjusted for inflation). In contrast, gross income nation-wide increased only by a factor of 1.9 per non-agricultural worker (also inflation-adjusted). In other words, agro-business receipts per average farm worker increased at more than twice the clip of the economy as a whole.

Hollywood needs to make a modern-day farm movie about agro-business giants who are as productive milking the taxpayer as they are milking the cows.

So, what's the puzzle? The puzzle lies in the observation that the American taxpayer made direct government payments to farm operations to the tune of $13.3 billion in 2004. Granted, this is down from the $22.9 billion in 2000, but the preliminary government estimate for 2005 of such payments is $22.7 billion. If U.S. agro-business is already so rich (on account of its huge productivity), why is the U.S. Congress still subsidizing it?

It seems to me someone needs to write a twenty-first century American farm novel and Hollywood needs to make a modern-day farm movie about the likes of Tyson or ADM or other agro-business giants who are as productive milking the taxpayer via Washington as the are milking the cows.