Automation, Productivity, and Growth

It seems obvious that if a business invests in automation, its workforce - though possibly reduced - will be more productive. So why do the statistics tell a different story?

In advanced economies, where plenty of sectors have both the money and the will to invest in automation, growth in productivity (measured by value added per employee or hours worked) has been low for at least 15 years. And, in the years since the 2008 global financial crisis, these countries' overall economic growth has been meager, too - just 4 per cent or less on average.

One explanation is that the advanced economies had taken on too much debt and needed to deleverage, contributing to a pattern of public-sector underinvestment and depressing consumption and private investment as well. But deleveraging is a temporary process, not one that limits growth indefinitely. In the long term, overall economic growth depends on growth in the labor force and its productivity.

This article first appeared in Project Syndicate on August 26, 2015.

The views expressed in this article are the author's own and do not necessarily reflect Asia Global Institute's editorial policy.