Following the introduction of major innovations like the combustion engine and personal computing, the productivity of American workers has seen significant jumps. Now, with artificial intelligence and cloud computing becoming increasingly common, experts are beginning to wonder why productivity rates are stagnant.
Productivity is the rate of value produced per hour worked, whether that work involves services or the production of goods. However, this metric doesn't just reflect fluctuations in capital and labor: it is also affected by innovation and the adoption of improved technologies that increase the value of labor.
While the increasingly advanced technologies of the current era have been hailed as major wealth generators, that wealth hasn't spread from tech giants through the wider economy.
"Even if the optimism about this wave of digital technology proves justified, that does not mean there will be a real sharing of the benefits," Laura Tyson, a professor at the Haas School of Business at the University of California, Berkeley, said.
For more than the last decade, annual growth in productivity has remained around 1%, despite the rapid advancements in technology. In contrast, from 1996 to 2004, productivity increased by 3% or more each year thanks to the increased availability of computers and access to the internet.
In the first quarter of 2022 alone, the productivity of non-farmworkers in the U.S. dropped by more than 7%, one of the biggest decreases ever recorded by the Bureau of Labor Statistics.
It's important to note the impact that national productivity rates have on workers: according to McKinsey & Company, an annual 1% increase in productivity for the next two years would result in a per-capita increase in income of an estimated $3,500 for U.S. residents. The massive increase in prosperity seen during the 1950s and '60s was driven by an annual 3.8% increase in productivity.
The experts don't agree about the causes behind the current stagnation in U.S. productivity. Some claim that the current technology isn't actually that groundbreaking, and others argue that the technology isn't sufficiently widely adopted yet to tell.
According to Northwestern University economist Robert J. Gordon, current artificial intelligence technology is "impressive but not transformational". Gordon is so convinced that his theory is correct that he made a "long bet" on it against the director of Stanford University's Digital Economy Lab, Erik Brynjolfsson.
Brynjolfsson believes that advanced tech will lead to increased productivity in the coming years. Regarding the fact that the results haven't been seen yet, Brynjolfsson is disappointed but not discouraged. Historically, it's taken time for people to adopt new technologies and discover the best ways to use them.
"Real change is happening - a tidal wave of transformation is underway," Brynjolfsson said. "We're seeing more and more facts on the ground."
So far, the majority of A.I. adoption has been seen at major tech companies and massive businesses dealing with tens of millions of customers. At the call centers for Anthem
According to Anthem, the point of these technologies is not to replace customer service staff. Instead, the responsibilities and expectations for staff have changed: while historically these jobs have valued shorter call times, more focus is now being put on customer satisfaction.
"Building the technical capability alone is just the beginning," said Rajeev Ronanki, Anthem's president of digital platforms.
Zayd Enam, the co-founder and chief executive of the call center software start-up Cresta, has said the same thing, that his goals are to improve worker performance and customer satisfaction, not to do away with jobs. However, he says that call centers are just the beginning and that widespread adoption is on the horizon.
"This technology is more general purpose than we see now," Enam said.
