The Upshot: Neil Irwin on Productivity

An interesting take on productivity may make you rethink the drivers of innovation, wages, and labor shortages.

In short:

"There’s a term for a restaurant that can serve the same number of burgers with half as many employees, and it’s higher productivity. (While this can conjure scary notions of a work force made redundant by robots, economists see a more hopeful picture: that higher productivity enables faster economic growth and higher incomes, at the cost of some temporary disruption for the workers affected.)

"In the context of the minimum wage debate, pretty much everyone agrees that this kind of response — “capital substitution,” to use the technical term — is to be expected. But there’s no reason it would happen only after a minimum-wage increase. You could imagine the same thing happening if wages rose because of market forces; that same fast food restaurant might invest in kiosks and robots if the labor market were so tight that no workers were willing to take the job for $10.

"If you look at long-term patterns of productivity growth, they roughly fit this idea, that a booming job market tends to be followed by a productivity boom, and that deep recessions are followed by productivity slumps."

Read more on Irwin's outlook on productivity in The New York Times

Comments (1)
No. 1-1

Interesting argument -- I would make the point that more innovation creates more (and better) jobs in the technology sector, too!