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April 1990, Vol. 113, No. 4
Productivity in scrap and waste materials processing
Mark Scott Sieling
Changes in demand and output, processing machinery, and industry structure helped spur long-term productivity gains in the scrap and waste materials industry. A Bureau of Labor Statistics new measure of industry productivity shows that output per hour of all persons in the industry increased at an average annual rate of 3.0 percent between 1977 and 1987, identical to the rate for all manufacturing industries combined.1 The all person hours index declined 1.2 percent a year, while output increased 1.7 percent. (See table 1.)
The demand for processed scrap and waste materials increased over the 1977-87 period due to growing exports and changes in steel and paper manufacturing processes, while increased recycling efforts made more unprocessed scrap and waste materials available. The installation of higher capacity processing equipment and a reduction in the number of marginal processing establishments (typically small-size firms) also spurred productivity gains over the period, especially since the early 1980's.
Average annual productivity gains varied considerably over shorter periods. For example, from 1977 to 1980, output per hour of all persons increased at an average annual rate of 2.4 percent, with output increasing faster than all person hours-5.7 percent, compared with 3.2 percent. These trends, however, were reversed during the 1980-82 period, when output per hour of all persons declined 2.4 percent a year, as output declined faster than hours and employment. Between 1980 and 1982, output fell by about one-fifth, as domestic and foreign demand shrank, while hours and employment each declined by about one-sixth.
Since 1982, improvements in processing technologies and machinery as well as continued strong demand for scrap metal and wastepaper contributed to above-average productivity gains. Over the 1982-87 period, output per hour of all persons increased by an average 5.2 percent per year, compared with a 4.5-percent annual increase for all manufacturing combined. Output increased 7.1 percent per year, overshadowing average annual increases in hours (1.8 percent) and employment (1.4 percent).
Year-to-year productivity changes reflected swings in demand, output, and other factors. For example, between 1982 and 1983, output per hour of all persons increased 19.9 percent. Output increased by 14 percent, reflecting strong foreign and domestic demand, while hours and employment declined because a large number of small-size establishments left the industry (primarily as a result of the 1981-82 recession).2 In contrast, output per hour declined 0.1 percent between 1978 and 1979, as output, hours, and employment all increased by about 10 percent.
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1 The scrap and waste materials industry is designated as SIC 5093 by the 1987 Standard Industrial Classification Manual of the U.S. Office of Management and Budget. The industry consists of establishments primarily engaged in assembling, breaking up, sorting, and wholesale distribution of scrap and waste materials. It should be noted that although the industry is classified as a wholesale industry, each State classifies it as a manufacturing industry for tax purposes.
In November 1976, the Institute of Steel and Iron Scrap (precursor to the current Institute of Scrap Recycling Industries) petitioned an interagency committee of the Federal Government, the Technical Committee on Industrial Classification, to change the industrial classification of scrap processors from wholesaling to manufacturing, citing advantages in zoning, taxation, and inventory accounting procedures. The request was denied on the grounds that it would be too difficult to separate processors from collectors, sorters, agents, and brokers. Agents and brokers who do not physically take possession of processed scrap and waste, but act as middlemen between suppliers and consumers, accounted for less than 5 percent of all establishments in the industry in 1982, less than 8 percent of total industry value of shipments, and about 2 percent of all workers. See K. W. Palmer, "Iron and Steel Scrap," Bureau of Mines Minerals Yearbook, 1977, p. 530; and industry sources.
Average annual rates of change are based on the linear least squares of the logarithms of the index numbers. Extensions of the indexes will appear in the Bureau of Labor Statistics annual bulletin, Productivity Measures for Selected Industries.
2 Franklin D. Cooper, "Iron and Steel Scrap," Bureau of Mines Minerals Yearbook, 1983, pp. 502-03.
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