We say necessity is the mother of invention, but it鈥檚 really the mother of adoption.
The coronavirus pandemic accelerated use of videoconferencing, e-commerce and other technologies. If this forced burst of innovation makes businesses and workers more productive, it could raise wages and boost future economic growth.
When a salesperson makes a Zoom call instead of traveling, he or she saves time and the company saves money. If the customer buys as much as before, the salesperson is much more productive.
Video chats won鈥檛 replace all sales trips, e-commerce won鈥檛 put every supermarket out of business and telemedicine won鈥檛 eliminate in-person doctor visits. To the extent these technologies spread, though, they make the economy more efficient.
Productivity, defined as output per unit of labor, has been growing slowly 鈥 just 1.4% a year since 2005, down from 3% in the late 1990s. Some economists call this the Great Stagnation, and it鈥檚 why both economic growth and wages have been lackluster for two decades.
People are also reading…
James Bullard, president of the 狐狸视频 Federal Reserve Bank, has frequently talked about what he calls the economy鈥檚 low-productivity-growth regime. 鈥淚 do think the elevated use of information technology has been eye-opening for many businesses,鈥 he said Thursday. 鈥淟et鈥檚 keep an eye on this and hope for the potential that we are getting back to a high-productivity-growth regime for the U.S. economy.鈥
Last year鈥檚 productivity growth was a relatively strong 2.4%. Technology investments helped, but there also was a less desirable cause: Jobs disappeared in service industries that tend to be less productive.
Economists are confident about strong economic growth this year and next year as we recover from the pandemic, but what about after that? Will our Zooming and online shopping help end the Great Stagnation?
Joel Prakken, chief U.S. economist at IHS Markit, isn鈥檛 ready to raise his long-term forecast just yet. 鈥淚鈥檓 doing more Zoom calls than before, and I think that鈥檚 more productive, but the question is, how is that going to show up in the numbers?鈥 he said.
Rik Hafer, a Lindenwood University economist, shares that skepticism. 鈥淭here are some pretty big negatives out there that aren鈥檛 going to disappear, even if you get a bump in productivity from technology,鈥 he said.
For a while, the benefits of new technologies will be obscured by transition issues, including capital that鈥檚 suddenly less productive. Think of the airplanes that will remain parked if business travel doesn鈥檛 come back, or the office buildings that stand empty while people work from home.
And if productivity is one factor in economic growth, the size of the labor force is another. Birth rates and immigration 鈥 the two sources of population growth 鈥 are falling, and millions of Americans dropped out of the workforce last year because of child care issues, fear of infection or pessimism about their chances of finding a job.
Prakken thinks it will take years for all those workers to return. 鈥淲e have marked down our near-term projection of the labor force significantly for the next four to five years,鈥 he said.
The pandemic may have done other kinds of long-term damage too. We don鈥檛 know, for instance, how a year of online schooling will affect the skill level of students when they graduate and enter the workforce.
Long-term economic shifts are notoriously hard to detect, as economist Robert Solow knew when he remarked in 1987 that computers were visible everywhere but in the productivity figures. We may find ourselves saying the same thing about the technologies we adopted to cope with COVID-19.