Seemingly small percentage gains in productivity can make a big difference in a country's wealth and living standards over time
Jim Lyski, an executive vice president for CarMax, at the auto reseller’s location in Richmond, Va., May 15, 2022. CarMax says it has had encouraging early returns from using real-time recommendation and coaching AI software for call center agents. (Matt Eich/The New York Times)
For years, it has been an article of faith in corporate America that cloud computing and artificial intelligence will fuel a surge in wealth-generating productivity. That belief has inspired a flood of venture funding and company spending. And the payoff, proponents insist, will not be confined to a small group of tech giants but will spread across the economy.
It has not happened yet.
Productivity, which is defined as the value of goods and services produced per hour of work, fell sharply in the first quarter this year, the government reported this month. The quarterly numbers are often volatile, but the report seemed to dash earlier hopes that a productivity revival was finally underway, helped by accelerated investment in digital technologies during the pandemic.
The growth in productivity since the pandemic hit now stands at about 1% annually, in line with the meager rate since 2010 — and far below the last stretch of robust improvement, from 1996 to 2004, when productivity grew more than 3% a year.
Economies grow not only by adding more capital and labor. Another vital ingredient is a nation’s skill in creating and commercializing innovation, which makes investment and workers more productive.
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