We are currently living in a time of unprecedented technological advancement. From robotics and artificial intelligence to the rapid spread of the internet and data processing capabilities, a technological revolution seems to be unfolding before our eyes. However, an intriguing question arises – if technology is accelerating, why isn’t productivity keeping pace?
Probing the Productivity Paradox
Contrary to expectations, economic data does not reflect a concurrent rise in productivity proportional to the technology boom. In the UK, productivity growth – which is the amount of output per worker – grew annually by 2.3% between 1974 and 2008. However, this growth collapsed to approximately 0.5% per annum from 2008 to 2020. A similar picture is painted in the US, where productivity growth fell from 3.1% (1995-2005) to 1.4% (2005-2019). This puzzling scenario raises concerns about the paradoxical relationship between technological advancements and productivity. Could it be that we are using technology to avoid work, or are there more profound, underlying factors at play?
Challenging Traditional Productivity Metrics
Dame Diane Coyle, Bennett professor of public policy at the University of Cambridge, underscores the flaw in existing data collection methods. “Nothing today is untouched by the digital revolution, yet our statistical methods have not evolved accordingly,” she observes. Her concerns revolve around the notion that modern technology’s productivity contributions might be lost in translation due to outdated metrics. One example is when companies outsource IT infrastructure to cloud-based providers. This move results in a more efficient, cost-effective operation but is inaccurately represented in economic data, making the company seem smaller instead of highlighting its increased efficiency. A historic comparison can be found in the industrial revolution of the 19th Century, when nearly 90% of data collected focused on agriculture, overlooking the transformative impacts of the nascent industrial sector
Discrepancies in the Distribution of Technological Benefits
There is a growing concern that recent technological advancements, including artificial intelligence, may be disproportionately benefiting a narrow segment of society. This skewed distribution can be attributed to inappropriate institutions and regulations or the nature of technology itself, which often favors highly skilled workers and professionals. One example is in the field of artificial intelligence, where there’s excitement about the potential for large language models to boost productivity. However, the benefits of AI will largely depend on how widely they can be disseminated throughout the economy. Economists Arjun Ramani and Zhengdong Wang suggest that if significant portions of the economy, like construction or creative work dependent on human interaction, remain unaffected by AI, the productivity benefits might be limited.
Redesigning Policies for Inclusivity and Broad Diffusion
While technology, R&D, and innovation are crucial for productivity growth, they are not sufficient. To transform technological progress into broad productivity growth, we need policies that encourage widespread diffusion, avoid productive dualism, and ensure inclusivity. These insights underscore the need to reevaluate how we measure and perceive productivity in the modern world. Amidst the ongoing technological revolution, it is essential to consider the broad dissemination of benefits, fair distribution of resources, and the inclusion of all sectors of the economy. If we can manage these effectively, the promise of the technological revolution in bolstering productivity may yet be realized.