It might seem like the pace of technological change grows faster everyday, but economic data tell a different story.
For instance, the U.S. economy is suffering through a period of historically low productivity growth in which the amount of stuff an individual worker can produce each hour has been increasing at a very slow rate. The reason for this is that businesses haven’t been adopting efficiency-producing technologies like in decades past.
So while your smartphone may be evolving faster than you can keep up, for businesses, the pace of change has been slower. This can be seen in what economists called Total Factor Productivity, which measures the growth in the application of technology and new processes on economic output:
As you can see, TFP growth was much higher in the earlier part of the twentieth century. It spiked again in the 1990s, and U.S. businesses benefitted from the computer revolution that made many industries more efficient. But since the year 2000, TFP growth has slumped once again.
Another way in which technological growth has been failing us is in its inability to create new jobs. Though job growth has been strong in the United States of late, in a new Oxford Martin School study economists Carl Benedikt Frey and Thor Berger find that since 2000, Silicon Valley has contributed very little to employment growth. According to the report:
The magnitude of workers shifting into new industries is strikingly small: in 2010, only 0.5% of the US labour force is employed in industries that did not exist in 2000…
Relative to major corporations of the early computer revolution, the companies leading the digital revolution have created few employment opportunities: while IBM and Dell still employed 431,212 and 108,800 workers respectively, Facebook’s headcount reached only 7,185 in 2013.
Because digital businesses require only limited capital investment, employment opportunities created by technological change may continue to stagnate as the US economy is becoming increasingly digitized. How firms and individuals are responding to digital technologies becoming available is a line of enquiry that deserves further attention.
The fact that the technological change of the past fifteen years has not lead to more productivity or employment growth is not a new concern. Optimists argue that throughout the history of capitalism, new technologies have always led to new jobs in the long run. But pessimists say that this trend isn’t guaranteed to continue, and the chance that we are in an era where wealth is created without jobs raises very thorny questions about how that wealth will be distributed fairly.