By doing so the MTA produces the same level of output with fewer employees - this is what our former CEO Jay H Walder championed giving rise to an increase in labor productivity. A second important factor leading to increase in labor productivity is technological change. Technological change allows the MTA to produce the same level of output with less labor leading to an increase in output per worker and thus in labor productivity.
The initial impact of the rising relative price of labor and the continual advance in the state of technology therefore is to increase labor productivity and reduce the demand for labor. Since labor productivity has grown by about 2 percent a year since 2000, does this mean that the economy offers 2 percent fewer jobs each year? The obvious answer would be no, although the initial impact of productivity growth is to reduce the demand for labor. It also leads to greater employment because lower product prices and higher real income stimulate additional sales in the economy. Rather than destroying jobs, productivity growth is actually the wellspring of higher per capita income and more jobs in the economy.
What is true at the economy wide level may not be true for an individual industry. However if an industry’s product has a low price and income of demand rapid productivity growth may lead to a net decline in employment as the additional sales resulting from lower prices do not offset the displacement of labor from capital/labor substitution and labor saving technological change. The increase in real income resulting from higher productivity growth in the one industry however will create additional jobs in other industries as that income is spent by consumers.
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