The Mining Machinery Industry: Labor Productivity Trends, 1972-84
O'Neil, Barbara A., Monthly Labor Review
Productivity, as measured by output per employee hour, in the mining machinery industry declined at an average annual rate of 1.2 percent from 1972 to 1984.(1) (See table 1.) This trend was substantially below the rate for the manufacturing sector, which grew at a rate of 2.0 percent during this period. Since 1972, the mining machinery industry has introduced new technology and work methods. However, major shifts in demand for coal have created wide variability in capacity utilization rates. Periods of both strained and excess supplies of coal have resulted in low productivity in mining machinery.
The decline in productivity was accompanied by a drop in output of 3.3 percent and a decline in employee hours of 2.2 percent. Although the productivity trend was negative, there was significant year-to-year variation. Many of the annual movements were associated with changes in output. In 5 of the 6 years that output advanced, there were increases in productivity. Similarly, productivity declined in 4 of the 6 years that output fell.
From 1972 to 1974, productivity in the mining machinery industry advanced nearly 12 percent, as output surged 35 percent. Over the following 2 years, productivity declined by 9 percent as employment in the industry increased substantially. From 1972 to 1976, employee hours increased more than 50 percent.
The industry's output rose in the early 1970's in response to increased energy-related demand for coal. From 1971 to 1975, coal production increased more than 17 percent. Purchases of mining equipment grew significantly during this period, leading to high levels of capacity utilization. However, by 1975, these rapid increases in demand also dampened productivity advances as mining companies became overbooked and capacity became strained.(2)
During the 1977-82 period, productivity fell at an average annual rate of 0.9 percent; both output and employee hours dropped. The industry was particularly hard hit by the economic downturn which occurred during this period.
The 1981-82 recession brought a substantial decline in the demand for many metals and minerals during 1982. The low level of construction activity and the decline in production of durable goods-such as automobiles, construction machinery, and electrical appliances-significantly reduced the demand for steel, copper, aluminum, and other metals. As many U.S. mines curtailed or halted production, the year was marked, in particular, by a slowdown in the demand for mineral processing equipment such as flotation machines and crushers. Although there was expanding coal production in 1982 which served to offset some of the decline in the demand for equipment used in other types of mines, it was not enough to prevent a severe drop in output and a decline in employee hours. This resulted in a sharp decline in productivity.
The recovery during the 1983-84 period was strong enough to turn around the productivity decline, leading to a rise of 4.3 percent. Although output continued to drop in 1983, an even steeper drop in employee hours resulted in a productivity gain of nearly 6 percent. In 1984, both output and employee hours reversed their long-term rates of decline. Productivity advanced 2.9 percent as output rose 4.8 percent and employee hours increased 1.9 percent. Growth of U.S. and foreign coal mine production in 1984 was a major stimulant for sales of mining machinery, particularly continuous miners, shuttle cars, roof bolters, and longwall mining systems. Increased use of coal in electric power generation, which now accounts for 50 percent of all fuel used, has helped the demand for mining equipment.(3)
Employment and plant size
Over the 1972-84 period, employment in the mining machinery industry decreased more than 20 percent, falling at an average annual rate of 1.8 percent. For the first 4 years of the period, employment increased steadily, rising from 21,300 employees in 1972 and peaking at 31,900 in 1976. …