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Stronger Labor Market May Increase Productivity

(p. B3) . . . the provocative conclusion of new research from the McKinsey Global Institute, the in-house think tank of the consulting giant, . . . suggests we should change how we think about the advancements that make society richer over time. It implies that as the economy returns to full employment, an outburst of faster growth in productivity -- and hence economic growth -- is a real possibility.

. . .

For years, McKinsey researchers have tried to understand what drives productivity growth from the ground up. They've studied how innovations that enable a company to make more goods and services per hour of labor spread across the economy.

The latest wrinkle is that the researchers now believe that productivity growth depends not just on the supply side of the economy -- what companies produce and what technologies they use to do it -- but also significantly on the demand side. That is to say, productivity advancements don't happen in a vacuum just because technology is available. They also happen because companies need to increase production to match demand for their goods, and a shortage, either of workers or of materials, forces them to think creatively about how to do so.

. . .

. . . consider how this dynamic might apply in the restaurant industry (or retail, or tourism).

The basic technology for self-serve kiosks has been around for years. But when the unemployment rate was at its post-crisis highs, employers could have their pick of good workers at relatively low prices. Now, with the jobless rate at 4.1 percent, good workers are harder to find. And, perhaps unsurprisingly, companies have been more open to installing technology that may have a significant upfront cost and require reworking how a restaurant is organized, but allow more sales without hiring more workers.

For the full commentary, see:

Neil Irwin. "Why Researchers Believe a Productivity Boom Is Now a Real Possibility." The New York Times (Thursday, Feb. 22, 2018): B3.

(Note: ellipses added.)

(Note: the online version of the commentary has a date of Feb. 21, 2018, and has the title "The Economy Is Getting Hotter. Is a Productivity Boom Next?")

The McKinsey report discussed above, is:

Remes, Jaana, James Manyika, Jacques Bughin, Jonathan Woetzel, Jan Mischke, and Mekala Krishnan. "Solving the Productivity Puzzle." Report McKinsey Global Institute, Feb. 2018.

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