Understanding The Productivity Paradox Economists are worried about a crucial measure of innovation in the economy. That measure is productivity growth. It was surging for decades, but it's been slowing down.
NPR logo

Understanding The Productivity Paradox

  • Download
  • <iframe src="https://www.npr.org/player/embed/531173429/531173430" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript
Understanding The Productivity Paradox

Understanding The Productivity Paradox

Understanding The Productivity Paradox

  • Download
  • <iframe src="https://www.npr.org/player/embed/531173429/531173430" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript

Economists are worried about a crucial measure of innovation in the economy. That measure is productivity growth. It was surging for decades, but it's been slowing down.

RACHEL MARTIN, HOST:

It's Friday. Did you have a productive week? Even if you managed to get a lot done, economists who study workplace productivity are seeing a persistent problem that has a lot of them worried. Sally Helm from our Planet Money team explains.

SALLY HELM, BYLINE: For a long time, economists expected that productivity in the United States would just keep growing and growing. But starting in about 2004, something went wrong. Martin Baily is an economist with the Brookings Institution, and he chaired President Clinton's Council of Economic Advisers.

MARTIN BAILY: When I looked at, you know, 2010, '11, '12, '13, '14, '15, '16 and it still wasn't picking up, that's when I began to get really nervous.

HELM: Which means Martin Baily is nervous right now. When Baily and other economists talk about productivity, they mean something really specific. They're talking about output per worker hour, so how much value an average worker in the economy is creating in an hour of work. Productivity growth is really important. In the long run, it's the way that everyone in a society can get better off. Here's an example - the main way that productivity goes up is through technological change. So when horses got replaced by tractors, farmers could do more in the same amount of time and food got more abundant. But today...

BAILY: Technology appears to be moving quite rapidly. You're constantly reading articles about robots or artificial intelligence or self-driving vehicles.

HELM: And yet, the numbers say those amazing inventions have not led to much productivity growth. Economists call this the productivity paradox. Martin Baily told me about another economist who has a surprising explanation of the paradox - Robert Gordon. He's a professor at Northwestern University. He wrote a book called "The Rise And Fall Of American Growth." And Gordon's basic argument is this - technology today, it just isn't transforming our work lives all that much. He says, take the iPhone - feels big, but...

ROBERT GORDON: So much innovation has gone into the iPhone and all the associated apps, and we don't see a pickup in productivity growth.

HELM: Gordon says computers and the Internet, they did give us a lot of productivity growth back in the '90s and early aughts. But now, he looks at the numbers, and he doesn't see a big revolution coming. To make the point, he has this thought experiment. He says, look back to a time when there was massive productivity growth. Imagine someone who goes to sleep in 1870 and wakes up in 1940.

GORDON: They wouldn't know that to illuminate a room you could turn a switch. They would be flabbergasted to look up at the sky and see objects flying in the sky, some of which had passengers in them.

HELM: Electricity, the internal combustion engine - those really changed the way we work. Gordon says changes now, they're incremental by comparison - an iPhone 6 to an iPhone 7. Even driverless cars - he says they'll bring productivity gains but slowly. It's a bit of a bleak picture. But there is some good news.

GORDON: I tend to look at myself as a jobs optimist even if I may be a techno pessimist.

HELM: If Gordon is right, we don't have to worry so much about those stories of robots taking all our jobs. That would cause incredible productivity growth. And for better or for worse, Gordon doesn't think that's going to happen. Sally Helm, NPR News.

(SOUNDBITE OF THE ALBUM LEAF'S "STRETCHED HOME")

Copyright © 2017 NPR. All rights reserved. Visit our website terms of use and permissions pages at www.npr.org for further information.

NPR transcripts are created on a rush deadline by Verb8tm, Inc., an NPR contractor, and produced using a proprietary transcription process developed with NPR. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.