Introduction
Productivity
is the economic measure to determine the overall
performance of an economy in terms of the efficiency of labour and capital. In
the past a key driver of productivity has been technological improvement. But Economists
of more recent times continue to be surprised by the declines in productivity
as indicated in the national accounts of developed countries. Whilst the
individual identification of productivity in a digital world may be far more
difficult to quantify statistically, nevertheless overall gains would still be
evident in the aggregated numbers of output evident in national accounts.
What
I aim to do with this brief paper is to seek to identify and discuss a number
of issues which I believe are relevant. The bottom line however is that no one
can say for sure what the exact reasons are and any study will be faced with a
mountain of conflicting evidences in today’s complex developed world.
At
the very outset the fact that a lack of productivity elicits so little coverage
in discussion is in itself an indication of the current malaise because the
subject to some degree has gone out of fashion. You might say in some respects
we are spoilt for choice and drift into arrangements just as fashion dictates
what to wear rather than what’s practical or necessary for our existence. The
question then is how important is it that technology in a digital world yield
overall improvements in productivity?
What
is oft overlooked is the only way we can advance overall living standards and
increase real wages is by way of improvements in productivity. If in a
digitized world this is no longer viable then we have to start questioning the
very wisdom of the pathway that is before us.
In my view possible key drivers which derail the benefits of technology can be summarised as ever increasing amount of re- work, a marked drift away from quality, a far too rapid take up of new technology and technology overload which cancels out its individual benefits. What I propose to do is to discuss why I think these factors contribute to the current malaise.
Past
Improvements in Productivity and growing complexity
However, as a preliminary first step I will outline in the form of
a brief history how in the past technological investments have enhanced
productivity. The fact is, of course very worthwhile gains are continuing to be
made in every sphere notwithstanding they don’t add up to noticeable
improvement in the national accounts of advanced economies. My initial
aim in taking this approach is to ascertain if any initial clues may emerge as
to why these gains have now stalled.
In the past great strides were made possible by the use of
technologies within machinery which automated processes and reduced labour.
Translating such productivity gains into statistics was not difficult and the
aggregated gains showed up readily in the output totals and by industry in
national accounts. After all it was easy to see if you were producing more
widgets with fewer people after investing in labour saving technologies.
But over time manufacturing in developed economies shrunk as
globalization took hold and many large manufacturing and distribution outlets
were re-located in developing economies which offered lower costs principally
because of lower wages paid.
During the ensuing period developed economies changed dramatically
with the void in manufacturing filled by services which now make up over 70% of
gross domestic product.
However initially the idea of productivity applying equally to the
service industries was not considered feasible since labour performed tasks
thought to be too complex and intuitive for machines or robots. But over time
technology began to adapt and automation was implemented in earnest.
What we are now seeing is increasing use of algorithms (An algorithm
can be a procedure or a formula for solving a problem, which is predicated on
actioning a sequence of specified actions) used to supplant what previously
were reasonably advanced or even highly skilled labour tasks.
At times entire so called back office functions are being eliminated. That
provides large initial gains which is fine providing employees are retained for
ongoing oversight. In the absence of that residual investment gains may be overshadowed by
the onslaught of emerging bugs and the need for expensive rework.
An
ever increasing amount of re- work in business which is now largely hidden.
It
follows on we are now all existing in a far more uncertain and complex time so
that many of the applications we rely on are increasingly linked to large scale
single off site depositories or service centres. What is also more evident is
the so called “business disrupters” whose applications challenge the more
expensive traditional base industries and particularly in the financial and
business services industries.
Although
the popularity of these applications is growing due to a lower cost base and
resultant benefit to the consumer it does not necessarily entail any
improvement overall in productivity. The same functions may be performed but
with less security back –up and hence much lower initial costs can give way to
increased outages and subsequent re work.
When
I talk to professionals, the concerns voiced all involve the same theme which
boils down to their concerns over a lack of quality standards and that faults
identification is being subcontracted out to the consumer. It’s more economical
to wait for the customers to discover the faults then to run costly trials and
testing before release. Of course there is going to be a price to pay at the
user level in terms of increased re work. What might provide a bridge would be
more “go to” partners who offers personal services to consumers and business
alike to effectively take advantage of new technology, but a barrier is the
high cost involved and expertise which must be continually updated.
Another
source for confusion is the standard practice of incentivizing consumers to do
more, supposedly from easy to use references on websites and do it yourself
technical set ups for new products. This is a phenomenon of our expanding
digital world where enterprises increasingly want consumers to do their own on
line account maintenance, enquiry or ordering. But what often passes for
instructions can be little better than generalised poor or even non-existent
steps. Just follow the prompts and unsurprisingly a large amount of re – work
is almost always guaranteed.
People
don’t include detailed explanations the fact it took those in small business,
days to set up a new phone system or get a new product or program to work or to
understand all the new features for the latest update they neither need nor
requested.
A
marked drift away from quality
Have
you also noticed for instance the proliferation of programming patches, updates, and correcting errors,
omissions or explanations that increasingly dominate communications on our
devices?
The
evidence of a lack of quality is now evident across a wide spectrum of goods
and services and involves a corresponding increase in time to rectify even
routine matters. One now as a matter of routine practice has to set aside
increasing levels of time to talk to a machine before you finally reach a real
person, after very long waiting periods. Eventually one is left with the
opportunity to tell the machine whether the human intervention was successful.
Are we trying to train the firm’s employees by talking to a machine and leaving
feedback to the employee as to how successful they are at problem
solving?
Information Overload and a lack of clarity
in communications
We are all aware of the need for clear
communications in business as it is critical to attend to the needs of
customers and stakeholders if one is to have success. But clarity can all too
easily be hijacked by the disjointed nature of electronic
communication, so that often picking up a phone and speaking in person can be
the best option.
Equally having to contend with too much technology can be counterproductive.
Take for instance a modem day employee with a laptop in use, a
large monitor behind that and a smartphone and office phone alongside ringing
impatiently has the potential to waste all of that high powered technology to
the extent productivity suffers. Studies have repeatedly indicated neither sex
are suited to multi-tasking which is a sure fire way to reduce productivity.
Trying to stay focused on current work while checking text
messages, responding to the buzz of incoming emails and attending to
intermittent phone calls is not conducive to high levels of
productivity.
So as multitasking becomes the norm for the younger generations
who seem to be able to skilfully adapt to all of the new technology devices
with relative ease (while still walking around) we might ask the question how
did they get anything done? The answer is they manage because they have grown
up in that era and learned to adapt – but don’t expect it to show up in any
efficiencies or in productivity gains!
Conclusion
There needs to be more research as to the reasons productivity
has stalled but I trust the points I have raised provide food for thought as to
some possible drivers.
I do think we need to think more about how to make technology
our servant rather than our master.
