The last 15 years have been hard times for many Americans, but there are now encouraging signs of a revolution.
Productivity growth, a key factor for a higher standard of living, has been on average only 1.3% since 2006, less than half the percentage of the previous decade. But on June 3, the U.S. Bureau of Labor Statistics said U.S. labor productivity increased by 5.4% in the first quarter of 2021. What’s better, there’s a reason to believe that this is not just a blip, but rather an announcement of better times ahead: productivity growth that will match or exceed boom times. the 90s.
Annual Growth in Labor Productivity, 2001-2021 Q1
Our optimism is based on our research which indicates that most OECD countries pass only the lowest point in the world. J-curve productivity. Driven by advances in digital technologies, such as artificial intelligence, productivity growth is now direct.
The productivity curve J describes the historical pattern of an initially slow growth of productivity after an advanced technology was introduced, followed years later by a sharp decline. Our research and that of others has found that technology alone is rarely enough to create significant benefits. Instead, technological investments must be combined with even greater investments in new business processes, skills, and other types of intangible capital before various discoveries such as the steam engine or computers ultimately increase productivity. For example, after electricity was introduced into American factories, productivity was stagnant for more than two decades. It is only after managers have reinvented their production lines using distributed machinery, a technique made possible by electricity, that productivity has increased.
There are three reasons that this time around the J curve of productivity will be bigger and faster than in the past.
The first is technological: the last decade has provided an amazing cluster of technological innovations. The most important are in AI: the development of machine learning algorithms combined with a large drop in prices for data retention and improvements in computing power has allowed companies to meet challenges from vision and speech. to prediction and diagnosis. The rapidly growing cloud computing market has made these innovations accessible to smaller businesses.