Must-Read: : The Mystery of Weak US Productivity: “From your drone home delivery to that oncoming driverless car, change seems to be accelerating…
…Warren Buffett, the great investor, promises that our children’s generation will be the ‘luckiest crop in history’. Everywhere the world is speeding up except, that is, in the productivity numbers. This year, for the first time in more than 30 years, US productivity growth will almost certainly turn negative following a decade of sharp slowdown. Yet our Fitbits seem to be telling us otherwise. Which should we trust–the economic statistics or our own lying eyes?…
At just over 2 per cent, US trend growth is barely half the level it was a generation ago. As Paul Krugman put it: ‘Productivity isn’t everything, but in the long run it is almost everything.’ It is possible we are simply mismeasuring things… fail[ing] to capture the utility of setting up a Facebook profile, for example, or downloading free information from Wikipedia…. But recent studies–and common sense–say our iPhones chain us to our employers even when we are at leisure. We may thus be exaggerating productivity growth by undercounting how much we work. The latter certainly fits with the experience of most of the US labour force….
Most Americans have suffered from indifferent or declining wages in the past 15 years or so…. For the first time the next generation of US workers will be less educated than the previous, according to the OECD, which means worse is probably yet to come…. It is also possible we are on the cusp of a renaissance… reaping the benefit of artificial intelligence, personalised medicine or take your pick. This may better fit our own fevered imaginations. Or it could be a chimera. Until then, the US and most of the west are stuck with a deepening productivity crisis….
Imagine the US takes much the same course in the next ten years as it has over the last. That would mean a further corrosion of US infrastructure, continued relative decline in the quality of public education, and atrophying middle workforce skills. It would also hasten the breakaway of urban America’s most gilded enclaves, further enriching the educated elites…. If you think Mr Trump’s rise is ominous, picture America after another decade like the last. Which brings me to the remedy: a universal basic income…. Today’s stagnation may be temporary or lasting. We have no way of telling. Common sense dictates we must act as though it is here to stay.