Solving the productivity mystery
by Robert J. Samuelson
Washington Post Op-Ed, 2016-04-03

A paradox of our time concerns productivity. We are awash in transformative technologies — smartphones, tablets, big data — and yet the growth in labor productivity, which should benefit from all the technology, is dismal. This matters. Productivity is economic lingo for efficiency, and it’s the wellspring of higher living standards. If productivity lags, so will wages and incomes.

The latest figures are disheartening. From 2010 to 2015, average labor productivity for the entire economy rose a meager 0.3 percent a year. If maintained over a decade, this molasses pace implies a puny 3 percent wage increase, assuming (perhaps unrealistically) that the gains are spread evenly over the labor force.

Historically, we have done much better. From 1995 to 2005, labor productivity increased an average of 2.5 percent a year, reports the Bureau of Labor Statistics. This would support a roughly 25 percent increase in wages and fringe benefits over a decade.


So the paradox remains:
How can all the new technologies,
with countless industries being “disrupted” and forced to change,
coexist with such poor productivity performance?
The answer may be simpler than we think.
The economy is supporting parallel technologies — old and new —
to do the same thing.


Businesses are splintering between wildly profitable firms and those that aren’t, argues White House economist Jason Furman. The same phenomenon may affect productivity. Some companies, presumably including many digital firms, are hugely productive. Many others are in the dumps, burdened by parallel technologies. It is the mediocre performance of this second group that drags down the economy’s overall productivity growth.


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