Productivity in Industrial Inorganic Chemicals

Article excerpt

Productivity in industrial inorganic chemicals

Output per hour improvements were retarded by slack demand; economes of scale could not be fully exploited, but cutbacks of less efficient plants, together wit' technical advances, bolstered productivity levels HORST BRAND AND ZIAUL Z. AHMED

As measured by output per hour, productivity in the inorganic chemicals industry remained virtually unchanged between 1972 and 1986.(1) By comparison, output per hour in manufacturing, as a whole, rose at an average annual rate of 2.7 percent over the period. Neither output of the industry nor employee hours changed significantly over the 1972-86 timespan the long-term trends were essentially flat.

The absence of any long-term improvement in productivity did not characterize all of the industry's components. In the manufacture of alkalis (mostly caustic soda) and chlorine, productivity rose 3.2 percent a year, reflecting a decline in output and an even greater decline in employee hours. In the manufacture of inorganic pigments, productivity improved at an 0.9-percent annual rate; here, too, the long-term gain resulted form receding output and hours. In the largest group of inorganic chemicals -- including most basic or commodity and large numbers of miscellaneous chemicals -- productivity declined slightly, by 0.2 percent a year. Here, output rose, as did employee hours, if at a somewhat higher rate than output.

The inorganic chemicals industry converts certain nonfuel minerals and gaseous fluids found in the atmosphere into specifically formulated mixtures, generally used as intermediates in the production of final goods. One characteristic, particularly of large plants, is continuous processing, and relatively "very little direct labor (is) used" in the industry.(3) Value added per production worker has been roughly twice that for all manufacturing, and the ratio of fixed assets to employment has been 3 to 4 times as high, bespeaking the capital intensity of the industry.(4)

The longer term trend in the industry's productivity exhibited two phases. Between 1972 and 1979, productivity grew at an average annual rate of 1.2 percent, with output rising at a rate 2 1/2 times that of employee hours. Capacity utilization rose, hitting a high of 84 percent in 1979. However, from 1979 to 1986, productivity, although marked by sharp year-to-year swings, slowed to 0.9 percent a year with both output and employee hours falling slightly. Capacity utilization receded to as low as 62 percent.(5)

The following tabulation indicates the productivity trend and its phases for the industry as a whole and for its components (see also tables 1 to 4):

As the tabulation suggests, the productivity performance of the industry was dominated by the "other basic and miscallaneous inorganic chemicals" group, which accounted for two-thirds of total industry employment. During the 1972-79 period, the comparatively weak showing of the alkalies and chlorine and of the industrial pigments industries contrasted with the improvement in that larger group; the reverse occured during the subsequent timespan.

Year-to-year swings in output per hour in the industry ranged widely, between a drop of 17 percent (in 1972) and a spurt of nearly 13 percent in 1984. Year-to-year losses in productivity were related to output declines accompanied by lesser declines, or even increases, in hours. This pattern was especially marked by the "other basic and miscellaneous inorganic chemicals" group, whose volatility exceeded the overall industry average. Here, year-to-year movements ranged from a drop of 21 percent (in 1980) to a gain of 12 percent (in 1984).

In 1986, the industry's productivity ran 12 percent above 1972, but had not regained the peak of 112.2 attained in 1979. The "other" group's productivity still ran 12 percent below its 1979 high. By contrast, output per in inorganic pigments had climbed 16 percent above its prevous high 1974; in alkalies and chlorine, the 1986 productivity level had soarded 56 percent above the earlier (1982) peak. …