Are We Wrong About Productivity?

Danielle Beurteaux

Productivity has been in the news a lot lately, what with Jeb Bush and his 4 percent ideas, and Amazon’s data-driven workplace.

29. September 2012, Berlin, Deutschland, Betahaus, SAP Coding Masters [Foto: KAY HERSCHELMANN Telefon:+49 (0)30-2927537 Mobil: +49 (0)171 26 73 495 email: Urhebervermerk wird gemaess Paragraph 13 UrhG verlangt. Weitergabe an Dritte nur mit Genehmigung des Fotografen. NO MODEL RELEASE!]A recent piece in the Financial Times titled “Productivity paradox deepens Fed’s rate-rise dilemma” really encapsulates many of the problems around the concept of productivity, or at least of measuring it. As the article’s author writes, productivity numbers “show that central banking is an art, not a science.” One of the key points under discussion has to do with technology in the workplace—are we actually in the tail end of a change, or is the big change yet to come?

The productivity gap

Now there’s research, just released by the OECD, that tries to clear this up. Aptly titled “The Future of Productivity,” the report found a dramatic difference between two types of companies—a small group has productivity increases that are so dramatic they eclipse the rest, which are companies with vastly smaller productivity figures. This difference is particularly acute in the service sector—a 5 percent growth rate vs. 0.3 percent.

Are we suffering from an innovation drought?

The OECD report says no. There’s plenty of innovation—it’s just stuck with the top performers and is not disseminating throughout the economy the way it should.

The report’s solutions for this issue focus on policy changes that encourage growth, competition, and collaboration; public investment; and social changes, including worker training, protections, housing, and decoupling benefits from jobs.

In short, their ideas of necessary changes are far-reaching and go beyond any particular industry, business, or boardroom.

The smarter versus harder conundrum

The phrase “work smarter, not harder” has been around since probably the 1930s (and perhaps comes from “the father of work simplification” Allan H Mogensen). The problem for many of today’s workers is that phrase has been flipped (see the uproar surrounding Jeb Bush’s productivity statement): They’re working harder at more jobs for less money, and that’s being reflected in productivity. (It’s also a simplistic phrase that just needs to die already—it’s overused, vague, and appears on too many motivational posters featuring animals.)

U.S. companies are hiring again, but they’re not raising wages for any workers but the top echelon, and they’re not robustly investing. And that’s affecting productivity.

The growth of the digital economy means that innovations should be easier to spread throughout global economies. Location, company size, employee numbers—these should no longer be barriers to adopting innovation and improving productivity.

In an open letter published recently on MIT’s Tech Review says the “digital revolution is delivering an unprecedented set of tools for bolstering growth and productivity, creating wealth, and improving the world.” But those tools and the benefits they deliver have been unevenly distributed.

The authors propose some changes to better share the benefits of technology. Their ideas, like the OECD’s, include policy changes related to education, immigration, research, and trade. They also call on business leaders to “develop new organizational models and approaches that not only enhance productivity and generate wealth but also create broad-based opportunity.”

And there’s also the idea that we need to rethink the concept of productivity. One of the authors of a recent paper from Wharton on technology change and productivity says that we need to “rethink how we measure productivity.” Technological change is multi-directional, and that will necessitate a change in how we look at productivity—no longer as a single number.

For more insight on today’s changing employment environment, see The Future of Work.

Danielle Beurteaux

About Danielle Beurteaux

Danielle Beurteaux is a New York–based writer who covers business, technology, and philanthropy. Her work has appeared in The New York Times and on Popular Mechanics, CNN, and Institutional Investor's Alpha, among other outlets.