Output per Man-Hour and Labor Costs in Food Processing

Output per man-hour by all employees in factories that process domestic farm food products grew at an average annual rate of 2.9 percent from 1947 to 1960. This is significantly smaller than the annual rate for the total private economy, but the same as that for the private nonfarm sector. Output per man-hour in farming rose more than twice as fast as in food processing industries; this difference can be explained by the fact that substitution of capital for labor was larger in farming than in food processing industries. The postwar rise in output per man-hour in factories that process farm foods reflects an increase in total capital per worker, improved quality of labor and management inputs, economies of scale and, probably most important, the introduction of new technology. The postwar rate of growth was significantly retarded by shifts in output among industries. Shifts occurred from industries with higher levels of output per man-hour to those with lower levels. In the food processing industries, hourly earnings of employees increased during 1960. They were about four-fifths larger that year than the average for 1947-49. But because of the gains in output per man-hour unit labor costs were up less than a third for the period. The percentage increase in unit labor costs was about the same as the general price rise in the total economy.