Contrary to Popular Belief, Increased Productivity Is a Good Thing for Manufacturers
Issue: August 2013, Posted Date: 9/26/2013
In today's hypercompetitive global economy, even the best manufacturers need to continuously boost productivity to survive. However, a growing number of pundits, activists and policymakers now argue that productivity causes job loss and therefore is bad for the economy.
They are wrong.
MIT professors Andrew McAfee and Erik Brynjolfsson have written one of the most prominent books making this claim, "Race Against The Machine." In it, they state that "it may seem paradoxical that faster progress can hurt wages and jobs for millions of people, but we argue that's what's been happening."
Other prominent academics have argued the same thing, including Paul Krugman, Richard Posner, and Brian Arthur. The popular press is also getting in on the bandwagon, with major features on CBS's "60 Minutes," as well as in the Associated Press, The New York Times, The Economist, The Atlantic and The Financial Times.
Before you throw your smartphone out the window, however, you should take some comfort in the following: There is no scholarly evidence that increasing productivity increases unemployment or lowers total employment growth in an economy, except possibly in the very short term.
In fact many studies find that rising productivity is almost always associated with lower unemployment.
Evidence from firms in a range of sectors likewise finds that while some firms shed jobs as they get more productive, a roughly equal number of firms actually add workers.
For more, read "Increased Productivity Is Key for Healthy Manufacturers, Healthy Economy" in sister publication IndustryWeek.