The Myth of Too Much Productivity

Blog Post - The Myth of Too Much Productivity

(K.R.) There was yet another drop in the nation's productivity rate. Productivity measures how much each worker produces (the amount of output per unit of labor). It has now fallen for three straight quarters, the longest such slump since 1979...

Productivity is THE most important factor in determining future wage growth and prosperity. That's because higher productivity means a worker can produce more and therefore earn more (and yes, higher productivity does lead to higher compensation, despite one narrative that's been going around). And the most critical factor determining productivity growth is technological advancement.

Technology such as automation allows one person to do what used to take hundreds of workers, increasing economic output dramatically. And the temporary unemployment created has never been a permanent issue, otherwise we'd be stuck at 90% unemployment ever since modern farm innovations eliminated 90% of all jobs in America). Instead, workers displaced eventually move to newer and more efficient industries, and economic output increases even more.

Yet modern day luddites continue to warn about how technology will result in a lack of jobs and mass starvation. Such a prediction has never and will never come true. Instead, the increase in output reduces prices, allowing people to work less while being able to afford more.  Such is the power of increasing productivity.

 

Comment list

  • Scott
    10-Aug-2016 04:00 PM

    Knowledge that is unfortunately common. This is where education in the United States gets a failing grade. Thanks for being a source of important information.

  • Patrick Trombly
    10-Aug-2016 06:55 PM

    Productivity gains have always improved real wages - - until now. But that's not because there's something wrong with productivity gains. It's because the gains come in the form of improved REAL wages, through falling costs being passed along to consumers in the form of falling retail prices - which give the central banks, who promote a baseless "fear of deflation," room to inflate.

  • Alan Falk
    11-Aug-2016 02:11 AM

    All too true. As I commented when I shared this to Facebook, "Economic Illiteracy is America's most abundant product.

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