The Productivity Curse

October 21, 2011

Have we become too productive?  If there’s any question that seems least apt amidst the global economic downturn, it’s this one.  Yet, take a look at any chart on employment and you’re bound to worry that something larger, more fundamental is afoot.  As Bill Davidow argues in The Atlantic, skilled and unskilled alike are now strapped to the pitiless logic of a hyper-productive assembly line.

Moore’s Law famously dictated the relentless doubling of computer processing power every two years.  Technological growth is in turn making us so productive that what you and I create is becoming indistinguishable from the work of others.  The result, according to Davidow, is that our work is fast become a near commodity: useful, replaceable, and cheap.

After the worst of 2009 was past, America’s productivity carved a steep path back up to its previous heights and beyond.  Employment, on the other hand, stayed comatose (note the chart above).  Why hire more workers if a smaller number can do more than enough to meet demand?  That is the employment challenge we face today. Davidow faced a similar situation when he used to work at Intel.  Intel was getting so good at making semiconductors – and the technology so refined – that the productivity of its workers was rising far faster than demand.  At the same time, the cost of each processor was dropping precipitously.  As a result, in Intel’s best years it still found itself having to lay off workers.  They had become “commodity workers.”

“If worker productivity is growing at an exponential rate and lots of new facilities are being built, we are at the point where commodity worker output can easily exceed the demand. If factory workers become more productive as a result of technological advances, fewer workers will be needed in each factory. When that occurs, the price for commodity work should decline, just as the price for transistors did. If this comes to pass, commodity workers will find themselves producing more and more units of output -- clothes, consumer electronics, washing machines, the handling of customer questions, etc. -- and being paid less and less for each one they produce.”

Knowledge workers are starting to feel like Lucille Ball on the assembly linetoo.

“Of course, those of us with unique skills should not be feeling too smug.  After all, a lot of what we do -- answering emails, cleaning up our inboxes, following large numbers of bloggers to stay informed, and maintaining our pages on social networks -- is commodity work as well.  These are all chores we have to do to stay relevant. The value of doing those commodity chores is dropping as well and so to maintain our current salary, we have to run faster as well.”

The fact that we are more capable than ever at working and that the cost of consumer goods has fallen should be very positive news – and it is.  We must consider though the brave new world we work in.  Just as companies closely examine their brand identity and the uniqueness of the products they offer in an increasingly competitive world, so should we in the labor market.  Productivity is a factor of physical and human capital as well as technology and institutions.  The answer to innovation and technological change then is to embrace it in a way that adds value to our unique work.  Only then will you and I avoid the productivity curse.