
Digital revolution has yet to fulfil its promise of productivity and better jobs - e15ctr0n
http://www.economist.com/news/special-report/21621237-digital-revolution-has-yet-fulfil-its-promise-higher-productivity-and-better
======
AndrewKemendo
The article doesn't really examine productivity, it is examining wages.

To wit: industrial automation has grown 6% YOY since 2003[1]. Manufacturing is
up worldwide and robotic integration is exploding, not to mention software
automation.

The reality is that these increases are not labor productivity, but capital
productivity. You also won't see these productivity numbers easily on a
balance sheet because they currently take longer to find return on value when
doing replacement work than scaling human labor. This is largely because it
takes time to transition labor force into a new role within a company or out
of the company altogether.

At the end of the day though, from a labor productivity perspective, there is
no raison detre to pay workers more for doing less unless they are providing
more value per time period.

While history has shown show that technology does not eliminate jobs, merely
creates new ones, the pace at which this is occurring is increasing [2] and is
arguably faster than workers can adapt.

This is also not to even mention where finance is putting investments, being
far from what I would consider proportional with respect to consumer goods and
industrial technology base.

In the end, there is every reason to believe that as capital takes more share
of the work, there will be less work and thus less pay for labor. That is
unless the market for labor, in places which are not yet ready for automation,
grows in such a way that it can absorb transitioning workers and new entrants.
I don't really see that happening without some major changes in the ethos of
how we allocate "value" to labor and define "work."

[1][http://www.thefinancialist.com/automation-a-trend-thats-
stic...](http://www.thefinancialist.com/automation-a-trend-thats-sticking/)

[2] [http://www.technologyreview.com/featuredstory/515926/how-
tec...](http://www.technologyreview.com/featuredstory/515926/how-technology-
is-destroying-jobs/)

~~~
gwern
> The article doesn't really examine productivity, it is examining wages. To
> wit: industrial automation has grown 6% YOY since 2003[1]. Manufacturing is
> up worldwide and robotic integration is exploding, not to mention software
> automation.

Which doesn't seem to have led to huge productivity gains on the order of 6%
annually:

> Yet the timing does not seem to support Mr Gordon’s argument. The big leap
> in American economic growth took place between 1939 and 2000, when average
> output per person grew at 2.7% a year. Both before and after that period the
> rate was a lot lower: 1.5% from 1891 to 1939 and 0.9% from 2000 to 2013. And
> the dramatic dip in productivity growth after 2000 seems to have coincided
> with an apparent acceleration in technological advances as the web and
> smartphones spread everywhere and machine intelligence and robotics made
> rapid progress.

~~~
YokoZar
6% industrial automation hasn't been resulting in 6% productivity gains
because most work is not industrial.

~~~
gwern
Indeed. And so it is a little disingenuous to point to narrow gains in one
area in a discussion of _broad_ gains, is it not?

------
jbob2000
It's because the baby boomers don't know how to use technology, and they're
still holding positions they should have retired from 5 years ago. This has
many widespread effects, one of which is the 'if it ain't broke, don't fix'.
People are still using Windows XP in their day-to-day jobs for christ-sake.

The digital revolution hasn't happened because it's being held back by
dinosaurs.

~~~
lucio
And the productivity difference between Windows XP and Windows 8 is...? 0.01%?

~~~
ivanca
I bet is more than 10%; Windows XP comes with a lot of bad baggage.. such as
IE7.

And anyway, the OS was an example, it just goes downhill from there.

~~~
agumonkey
Cut that 10% in half because known baggage will trump unknown valuable
capabilities.

~~~
ivanca
The problem is that we are talking about the kind of people that doesn't even
know half the valuable capabilities of Windows XP.

~~~
agumonkey
True, but that won't change the fact that anything better but different from
that old XP will throw most users so off they won't even care.

------
Amanojack
The goal of technology is to eliminate labor, not to create the need for more
of it. If everyone is fishing with their bare hands and catching just enough
to feed themselves (edit: say one fish), then when nets are invented and
people can catch 100 fish a day, 99% of the fishing industry jobs disappear.
That's a wonderful thing. That means 99% of the population can devote
themselves to less urgent priorities, like building shelters, making clothes,
etc. Sure, those crackerjack fish catchers who could catch 2 or 3 fish a day
have lost their jobs, and might become less affluent than they were...but the
few losers in every industry when technology changes the employment structure
are outweighed by the vast majority who benefit greatly. And lest this seem
unfair, consider that if everyone's current job were obsolete, everyone would
be astoundingly better off despite losing the comparative advantage they had
built in their career.

The same thing has been happening since the first inventions. It's been one
long history of job loss and rising standard of living, and no short term
variance should obscure this fact.

The more jobs made obsolete, the better. People will simply shift to less
important work, and increasingly people will simply work fewer hours, as
technology makes the economy so productive that prices fall to such a degree
that people can live on an hour of labor a week.

~~~
nickthemagicman
I liked your post.

The issue is that with modern technology,tech is not just replacing ONE job
like fish catching.

Tech is replacing ALL jobs..... fish catching, clothes making, accounting,
medicine, programming, etc.

Sufficiently advanced tech can replace just about ANY job. And do it better
than a person can.

So the issue is where does everyone go?

And I don't think 7 billion people can all be inventors.

~~~
cell303
Actually, I think they can (also be entrepreneurs and artists) They just can't
all be successful ones. However, due to the non-linearity of success, the
winners would offset the losers, which is also why incubators like y
combinator can make a profit.

So what it boils down to really is a social issue, where you have to find a
way to ensure a fair treatment of the losers. Theoretically they were just as
likely to be huge successes (I think this is especially true for artists) as
those who actually turned out to be. If that wasn't true one could easily run
a successful incubator on their own.

However, culturally, the idea of compensating the losers seems alien (and even
outrageous in some places) as we used to live in a economy with a much more
linear relationship between effort and return. I guess this is why ideas like
'basic income' have such a hard time being even discussed, although they would
address the issue, maybe even solve it.

------
wyager
You have to be blind not to see the tremendous productivity and lifestyle
improve improvements wrought by technology.

\--sent from my handheld multi-gigaflop communication device/sensorium/access
point to the sum of all human knowledge, which cost less than what most people
in my country of residence make in a week and was not available to even the
richest billionaires ten years ago.

~~~
bjelkeman-again
My wife, who is a graphic designer and has moved to latest tech all the way
from photo-typesetters, now does the work of: typesetter, typist (people used
to re-type the copy), pasteup artist, courier, several people at the printer
(making plates, printing, packing, labelling, sending), postman and post
sorting. They distribute PDF files mostly, via email marketing and a web site.
Stock photography workers that would send slides, and I am probably missing
some roles in there.

This was indeed a productivity improvement, and a lifestyle improvement for
her. But it is not clear that it was for all the others involved previously.
It is correct that the expectations are higher than they used to be for the
same amount of money paid (colour print, quality of design etc.), but I am not
sure this makes up for the loss of jobs for those that aren't involved
anymore.

I know some of these roles have moved on to do other things, but as far as I
can see it seems like we have what they call a "jobb-less recovery" where
technology provides efficiency and productivity improvements for the few, but
leaves a lot of people behind.

Where I live, Sweden, people are well educated, the economy is doing well, and
we have a substantial youth unemployment. I know it is a fairly complex
problem as I have a hard time finding skilled developers for example, ie there
are jobs to be had, but the courier and the guy working at the printer
previously can probably not retrain to those jobs easily.

~~~
HarryHirsch
_This was indeed a productivity improvement, and a lifestyle improvement for
her._

If that's the state of affairs, good for her. But talk to my previous boss,
who recently elebrated his 80th birthday. He _knows_ the times when he would
write a manuscript, hand it to his secretary, who would type a fair copy, and
then it would go off to the publisher, where it would go to the typesetter (a
union man), and then the plates would go to the printer (printing press
operated by a union man, too).

A couple of years back he was invited to write a review, and he was
_absolutely livid_ for several days. The publisher had requested _camera-ready
copy_ ; they gave him formatting instructions, he had to deal with the
minutiae, and what he handed in did not conform to specifications, so he had
to do more formatting. At the end of the day, all the labour-saving devices
did not save him time, although they certainly made
Springer/Elsevier/Pergamon/whatnot plenty extra bucks. Some progress.

~~~
ivanca
Yeah, the new way of doing that is actually just publishing in
craiglist/facebook/sponsors/etc

------
gregpilling
Consider welding. It is a blue collar job that can pay pretty well, if you are
fast on piecework or have in demand skills like tig welding titanium. I employ
two guys welding manually, and I also have a 7 axis Panasonic PA 102S welding
cell.

I have one high volume product that we sell, that I calculated the labor cost
per part to be about 6 cents if we ran the robot at normal speed for 40 hours
per week. When that part was manually welded the labor cost per part was about
50 cents per part. Incidentally, the guys were happy when that part went
automated, since doing a high volume part is boring, mind numbing work. (1)

In the case of this little part, because the labor cost went down, and as a
factory owner I know the part is more precise and can be made in an easily
calculable window (it yields 8 parts per minute now), then I was able to cut
the retail price by 50% and sales tripled. We can now bid on jobs that would
have overwhelmed our capacity before.

So who won? I made more money, the workers job got better because some
drudgery was removed, the workers income went up because we have a profit
sharing program, the consumer pays less, and because the price was lower more
consumers get to enjoy the product.

I am no economist, and I have no well researched and linked rebuttal to the
article. In my little microcosm of the world everybody wanted the automation.
Me, the guys, the customer. Everybody has won. Nobody involved would prefer to
go back to the old way.

1\. personally I find it annoying when academics talk about labor vs
automation. Some jobs suck to do (dull, dirty, dangerous), and often the
worker is the happiest when it no longer has to be done by a human. The worker
is usually pretty happy to have extra time to do that other thing they have
been wanting to do for long time. Who on this forum misses setting up a blog
the way you had to before Fantastico came along?

~~~
waterlesscloud
>the workers income went up because we have a profit sharing program

So in this case, labor won because they also have a stake in the capital.

Unfortunately, that's the exception rather than the rule.

~~~
gregpilling
I do not know the stats, but within my circle of friends that have businesses
most of us have profit sharing plans of some sort. I try to share the profits
as often as possible. We have had bonuses for weekly output for 10 years and
now I am trying to change to more of a Nucor style pay system. See
[http://www.nucor.com/story/prologue/](http://www.nucor.com/story/prologue/) .
In comparison I have a friend who has a 401K profit sharing program and all
the bonus goes to that. He has had a couple of guys retire (mechanics who
serviced the trucks) and they had over $100,000 each in their retirement
accounts. It was the only savings they had, beyond the value of their tools
and 10 year old trucks.

I disagree with my friend a little - I want my people to see the efforts of
their work immediately. So they get the bonus immediately, even if I don't get
paid for 60 days. Someone should disrupt the setting up of 401K for small
business, make it a 5 minute sign up. At this point I have not taken the time
or effort to set one up for my team. That is in the plan for 2015.

Our business is in a war for talent, just like Silicon Valley, it is just that
the stakes are smaller. My fastest welder easily puts out more than triple
what my slowest welder (former) ever did. The robot is three times faster than
the fast guy. So I need to find someone talented enough to program a 7-axis
robot, as well as a talented enough welder to understand jigging, metal
expansion, automated clamps, can make a nice appearing weld (much harder than
you think, #weldporn), and this has not been easy. In fact it has not been
possible, so I use an in-house fabricator for the jigs, and an outside
consultant to program the robot ($75 an hour). In order to interst a person
with that much talent (they always have MANY job options) I have to have a
program that they can see how they can earn an outsize salary. This is the
motivation to go Nucor.

Nucor pay is 66% team incentive and 33% salary. I am going to a $320 per week
base, with a percentage of total weekly sales of all parts of the company
(some people work on all products, some on half). Half of the net profit at
the year end will be split, and we already have a health benefit for all
employees full and part time. We also offer up to 12 weeks vacation a year,
but nobody has gone over 4 weeks ever. I hope that my people who make $600 a
week now will be earning $1000 a week next year. The way the pay is
structured, if we can increase output without increasing head count then this
will occur. We have invested in automation, and I am currently working on a
way to use cheap Arduino/Beaglebone CNC on our manual equipment. Most of our
competitors manufacture in low wage countries, while I would like to stay in
the US.

Wages are low in Tucson and if I could offer blue collar jobs for $50K per
year then I would have a thousand applicants for every job. My little company
is no different than any other. There is lots of talk of the 10X developer on
HN, but really I think the discussion should be more about 10X PEOPLE. I need
the 10X people too. I have had 20+ people over the years work in my office for
me and three of them were 10X people. I only have one like her now, with a 21
year old who looks promising as the other. These are the kind of people that
you can throw a new hairy problem to with no explanation and they can get it
done. The Valve Handbook would call them T shaped people. Paul Graham would
call them relentlessly resourceful. To me they are the "I got this" people. I
tell them the problem, the tell me that they got it, and I can go on to the
next issue with faith that the problem will be resolved come hell or high
water. These people are rare in every discipline and the difference they can
make is transformative. Your world changes as soon as you hire them. When they
leave, your business just seems to run less smooth. Talent matters in every
business.

I also realized that I would not work at my place. There was no possibility of
a large enough upside to be interesting to me. There is as an owner of course,
but I did not have a defined clearly explained program for my people telling
them how to get to a 6 figure payday. So that is on the agenda. To create a
job that I would want to apply for in the sense of future upside in pay,
personal growth or something. It seems a silly thing to have overlooked for 10
years but that is the way things happen in business.

Like I said, I don't know the stats. I don't know if I am an exception or
fairly common in my thinking. It doesn't matter though, I am merely trying to
solve the pain of finding good people. Share the upside and the talented ones
want to work with you. Keep it to yourself and watch them leave to your
competition or to become your competitor themselves and take your best staff.

------
Htsthbjig
The article is full of inaccuracies.

E.g They put a graph of Spain and salaries growing more than 10% in the real
state bubble period.

What they don't add is the cost of living going up as well, specially renting
a house or buying it, that went up 400% in lots of places.

Now those salaries have gone down to their previous level(the graph does not
include the last two years), but house prices had been sustained as much as
they could with interventions like creating "bad banks" so free market could
not do his job. Real state prices had gone down probably 30%, far from pre
bubble plus real inflation levels.

It does not matter if your salary goes up if inflation goes up higher.

Productivity has increased dramatically over time, but taxes, debt and
overspending by the government has grown more.

About the top earners, this is what happens when you give free money to people
in Wall Street. Stock goes up, and the percentage of wealth they have is
enormous. But this is "paper money", and will last until stock goes down, and
it will go down when interest rates go up, and this will happen soon, in one
or two years.

------
mindslight
Wat? The premise has always been _fewer_ jobs. What our entrenched societal
institutions end up doing with this change is a different matter.

------
tn13
Let me count what is wrong with this article in brief.

1\. The title "Technology is not working" is true in general for "X is not
working" if your are going cherry pick the only group for which it is not
working. By that sort of logic nothing really works.

2\. The term productivity is not at all defined in the whole article. What we
should care about is the productivity of the whole society and not some
isolated group.

3\. Wage growth has nothing to do with productivity in general. For example
wage rates going down could also mean more is being achieved with fewer humans
of the same skill which basically is productivity improvement.

------
Animats
Productivity, yes. Better jobs, no. Machines should think. People should work.
Watch this Kiva Robotics training session:

[http://www.youtube.com/watch?v=CWNuaPE4DTc](http://www.youtube.com/watch?v=CWNuaPE4DTc)

That's how orders are picked at Amazon now. (Also Staples, Pets.com, and many
others.) All the thinking and planning is done by computers. Humans just pick
up items where the light pointer tells them to reach, and put them where
another light tells them. There's no possibility of promotion. They don't
program the robots. They don't fix the robots.

The company that makes the robots employs only a few hundred people.

The inventor of this system was involved with Webvan fifteen years ago. He saw
that customers wanted instant delivery, but Webvan cost too much to run,
because it had too many people. If they could get rid of the people, instant
delivery would work. Now, that's been done.

------
joemaller1
Isn't it really productivity OR jobs? A smaller number of productive workers
can accomplish the same finite amount of "work" as a greater number of less-
productive workers.

Welcome to the Industrial Revolution.

~~~
brent_noorda
We need more technology, not less; specifically: more robots. Robots designed
to relentlessly shop for items online, and to sleeplessly hail ride-share
cars. With enough such robots, all us people will find full time employment
shipping products to those robots from our Amazon warehouses, and driving
those robots around in our Uber cars.

~~~
gregpilling
You might like to read
[http://en.wikipedia.org/wiki/Midas_World](http://en.wikipedia.org/wiki/Midas_World)

------
mpg33
This may sound oversimplified but I think people will have to become more
creative and create their own jobs in the future (ie self employed
entrepreneurs). Simply hoping to gain income from a job via the traditional
route of applying to companies is becoming more difficult. I think the large
growth in "startup culture" over the past 5 years is proof of this.

~~~
nickthemagicman
90% of startups fail. These are well funded startups.

There has to be an actual need for a product in the market and need is not
easy to predict.

Even the successful startups are succesful because of a little luck and being
in the right place at the right time.

Luck is not the best financial planning strategy for feeding your children.

------
oscargrouch
I dont know, but i think software kind of replace, at least in part, people's
labor;

Technology and productivity is against labor and wages; unless you are part of
the very few people needed to create the machines or softwares; probably with
the advance of AI, even taht can be replaced..

I wonder why people tought that keeping replacing people with robots, and
creating profit fetichism on corporations could lead to something else?

This is the old Marx profecy going on; That only creative and talented type of
labor could survive; anything out of this will probably be replaced by
automatization

Technological society didnt come to save the majority of people's lifestyle,
its comming to kill the rest of it;

Of course some new value, and blue oceans will come to the surface; but then
the automatization and profit circle will rule again, until little to none
people are needed

But than, who really want to pick up the phone, deliver the sandwiches, or do
repetitive and low demanding jobs?

This is good, only that humanity need to adapt, have more knowledge and go for
the creative types of labor

Problem is 7 billion people maybe would be too much for this , so i dont think
is sustainable to everyone on earth to live like that.. and people with low
levels of inteligence will have a hard time living in a society like this

------
godisdad
See also: [http://www.nytimes.com/2012/11/04/business/a-capitalists-
dil...](http://www.nytimes.com/2012/11/04/business/a-capitalists-dilemma-
whoever-becomes-president.html?pagewanted=all)

In particular the part about "efficiency innovations" vs "empowering
innovations"

------
bluedino
It has. People just didn't realize the efficiency of online retailers would
crush so many middlemen and individual brick and mortar stores (mom and pop
shops and mail-order houses), as well as entire existing companies (Best Buy,
etc)

~~~
Altay-
E-commerce makes up ~6.40% of US retail sales. Its certainly shaken up the
landscape, but 'crush' is overstating the case...

~~~
cpwright
Its going to entirely depend on the segment, Wal-Mart gets 55% of revenue from
groceries apparently (I took some time to look at what fraction of groceries
would be of overall retail sales, but couldn't find it). So I think a
reasonable assumption is that a large chunk of retail sales are groceries.
Another large chunk is going to be automobiles, which in some metrics get
excluded; which are another large part of retail sales.

If you keep chopping away big parts that aren't conducive to e-commerce; the
6.40% is going to be a pretty big percentage. Small specialty stores are
probably hit especially hard, to the point of being crushed; going out of
business and making the e-commerce players a larger percentage of the market
and thus more efficient, driving even more e-commerce in a positive feedback
loop.

~~~
Altay-
If you want to see just how irrelevant E-Commerce is, just look at your
neighborhood Apple Store. Their products are the sort that could easily be
purchased online -- commodity technology products aimed at the supposedly tech
savvy.

The only visible effect of e-commerce has been the thinning of margins. The
ability to check prices online leveled the playing field between retailers and
customers. This has brought us closer to a real market -- one where perfect
information is available to all parties.

~~~
bjelkeman-again
E-commerce has more or less killed my local bookstores, travel agents, music
(CD) stores, music instrument stores, video rental, bank branches, tobacconist
(selling magazines and newspapers) and post office. Not sure I would call that
irrelevant.

~~~
Amanojack
And that's... _good_. Shops are only good to have in your town insofar as they
let you buy stuff more easily and cheaply. As soon as they no longer served
that purpose, the labor and real estate was being wasted. Now that those
businesses have shut down, the real estate is available for more productive
uses and the workers are free to do something that is more useful to society.
Your locality is that much better off for it, especially the poorest people,
since they can obtain goods and services more cheaply.

~~~
bjelkeman-again
I disagree. My locality is not better off. The centre of my town now nearly
consist of fashion and coffee shops. And people working there are not more
useful to society. They are selling nothing I need. I'd like to actually be
able to purchase things that I use locally. The local society looses skills
and functions. No service on broken parts, no local knowledge, well, except
for fashion knowledge and his to package a latte.

------
Tycho
Bluntly, I guess there are smart jobs and dumb jobs. The demand for smart jobs
should be practically infinite - where now you have a doctor, a lawyer, a
childminder and an accountant, in the future you might also have a geneticist,
a landscape gardener, tutors, designers, trainers, dieticians, researchers,
risk managers, handymen... There will probably also always be a need for dumb
jobs, but perhaps the difference will be that they cannot be the backbone of
an entire economy.

------
flipcoder
The entire thing is bottlenecked. Automate the education system.

~~~
chippy
The article basically mentions this.

"That may be the wrong place to look for improvements in productivity. The
service sector might be more promising. In higher education, for example, the
development of online courses could yield a productivity bonanza, allowing one
professor to do the work previously done by legions of lecturers. Once an
online course has been developed, it can be offered to unlimited numbers of
extra students at little extra cost."

------
jostmey
Yes, let's blame the bad economy on technology. I mean, it couldn't have been
Wall-street's fault or Washington's fault.

~~~
rayiner
Wall Street was Wall Street and Washington was Washington in the 1990s and the
1950s when there were plenty of jobs. It's hard to blame the constant thing
for problems that are different between then and now.

~~~
marcosdumay
No, they were not.

Society was different, laws were different, both Wall Street and Washington
did eat a much smaller share of the US GDP.

You can't even extent your observation to the rest of the world, because
almost the entire world passed through the same transformation at about the
same time.

~~~
rayiner
Not really. 1950-1960 was thoroughly the modern world:
[http://peakwatch.typepad.com/.a/6a00d83452403c69e2017d40f40b...](http://peakwatch.typepad.com/.a/6a00d83452403c69e2017d40f40bd2970c-800wi).
Federal sending was 16-18% of GDP from 1952-1967. From 1995 to 2008 it was
18-22%. So a little smaller, but not "much" smaller. It spiked above that in
2008 because of the recession, but you can hardly blame federal spending that
happened after the recession for having caused it.

~~~
me2i81
But the financial industry as a percentage of GDP is much higher now than in
the 1950-1960 era.

