Technology and productivity - a complicated relationship | Deloitte UK has been saved
Limited functionality available
There are numerous explanations for why technology is no longer boosting productivity in the way it did in the twentieth century. The US economist, Robert Gordon, argues that today’s technologies are less productivity-enhancing than the great inventions of the past. The opposing view is that technology is still working its magic, but in ways, such as improving the quality of goods and services, which are poorly captured by the statistics.
Last month the Harvard economist Jeffrey Frankel took a different approach pointing out that for all its benefits technological change also inflicts damage and disruption.
Technology continues to open up new avenues for warfare and criminality. Cyber-attacks, phishing, malware, security breaches and viruses are facts of life in the age of the internet, ones that, as the WannaCry attack last year demonstrated, impose huge costs.
A related theme is the effect of distorted or false news on our understanding of the world, the public exchange of information and trust in institutions. The risk that lies take hold is age old. The internet was initially seen as a safeguard against such threats – but it is clear that it also has the capacity to magnify them.
At a company level, the benefits of new softwares and innovations are partially offset by the time needed to master them and the disruption, distraction and glitches along the way. Economists tend to downplay the disruptive aspects of technological change which are an almost inevitable price to be paid for realising gains.
Then there is the distractive power of social media and smart phones. The US Chamber of Commerce Foundation has found that people typically spend an hour of their workday on social media, rising to 1.8 hours for millennials. Another survey found that traffic to shopping sites in the US surge between 2pm and 6pm on weekdays.
The effects on productivity are even more pervasive than these numbers suggest. When you switch tasks what Sophie Leroy, a professor at the University of Minnesota, dubs as attention residue, prevents your attention from fully returning to the main task. Concentration and effectiveness suffer. By one estimate, it takes an average of 25 minutes to fully engage with the prior task. Moreover, workers who are interrupted are significantly more likely to go on to ‘self-disrupt’. They find it harder to settle down and work even when there are no distractions.
Recent technologies have had other unexpected and unwanted effects. In the US the main cause of driver distraction, in accidents that killed or injured almost 400,000 people in 2015, was text messaging. One theory for the rising tide of male High School and college graduates who choose not to work in the US is that they are happier playing video games.
Professor Frankel’s argument that technology brings with it costs, disruptions and new threats, as well as benefits, is a powerful one. But it is not new.
Aerial bombardment, pollution, road accidents, obesity, the degradation of oceans…and many other ills can be laid at the door of earlier innovations. Cyber warfare is the latest in a very long list of technologies pressed into the service of conflict. Alfred Nobel founded the eponymous prizes, it is said, partly out of guilt for having invented dynamite and for his role in the armaments industry. It is far easier to think of technologies that brought with them new problems than the ones that brought only benefits.
Innovation tends to be seen in terms of ground-breaking inventions. There is at least as much magic in what follows – applying them to real problems, learning how to get the most out of them and countering their failings. It is a changing relationship. Improving knowledge means we grasp the unforeseen consequences of past innovations – as with asbestos, leaded petrol and tobacco. And rising incomes make societies less willing to tolerate the known side effects of past development. China became rich and then it became concerned about pollution.
The relationship between people and technology is also less straight forward than it might seem. We may spend more time at work on social media and Amazon but technology also means we spend more time outside working hours doing our jobs – so much so that a number of businesses have taken steps to limit out-of-hours emails to counter this erosion of free time.
The obvious challenge is to extract the benefits and minimise the costs of technology. As Professor Frankel’s thoughtful post makes clear, that is no easier today than in the past. The rapid material and human progress of the last two centuries suggests humans are pretty good at getting this right.
Ian Stewart is a Partner and Chief Economist at Deloitte where he advises Boards and companies on macroeconomics. Ian devised the Deloitte Survey of Chief Financial Officers and writes a popular weekly economics blog, the Monday Briefing. His previous roles include Chief Economist for Europe at Merrill Lynch, Head of Economics in the Conservative Research Department and Special Adviser to the Secretary of State for Work and Pensions. Ian was educated at the London School of Economics.