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Tech boom creates too few jobs – and the point is?

17 Oct 2016

The title of this blog is the title of an article on the front page of the Wall Street Journal today. It is relevant to us since we all work in IT.  But what does the essence of the article mean?  The outcome is clear: though tech-driven growth has recovered (i.e. profits are high), it seems that growth has been delivered at a lower level of employment. At least, US employment. To be clear this suggests increased productivity.

The article explains several reasons for the observation related to “jobless recovery”. Many new tech businesses are built on off-shore labour pools. For example, where does Apple get all its products made? Why, in Asia and mostly outside the US.  There are many more examples like this in the article.

This may or may not then result in real productivity globally but reported productivity locally. For example, the US suggests output is up but inputted costs are down: thus US productivity are up. Globally the impact may be less impressive though since the work has simply shifted, and costs per hour reduced (the driver of the productivity); it may not have actually increased as much as we assumed – only the cost of accounting for that work actually went down.

And this then is the real problem: It is not as critical to focus in jobs accounting. It should be more important to focus in the factors that drive - and delivers - productivity. The article even quotes Erik Brynjolfsson, an MIT economist, who has published much on his studies of productivity. I have read much of his work and while it is fascinating, it seems to not quite capture some worrying concerns.

For example, much of the so-called tech-driven benefits we all hear about has not actually driven the right kind of productivity that leads to economic growth. Smartphones are great for allowing us all to do more emails in the day. The problem is that the time it takes (the inputted cost) to do an email has not changed in roughly 20 years. We just do more of them. So output has increased but so too has inputs.

How innovation (the right kind) diffuses across an economy is another important element of the puzzle concerning (the lack of) productivity. This is more complex for a number of reasons analyses widely including education, regulation, and other forces that comprise creative destruction. In essence our current political environment is very anti-growth, despite the TV-rhetoric we hear. On top of this I happen to think that there are different kinds of tech-based productivity and that this has not yet been recognised in published research.

So all told it’s not too bad that US jobs in tech have not recovered as much as with past ‘recoveries’. It might be bad but at this point we don’t have the data, or insight, to make a valid call.

Lastly the way the BLS actually publishes data to help answer this conundrum changed recently. In fact their efforts, since they don’t work in industry, actually make studying the problem harder. The BLS treats all software as an homogeneous asset. Anyone in IT will tell you that it is not the tool that’s most important; it’s the people and how they use it that is. The same software can support a raging success or a complete failure. Yet in the data, software is software. Oops.

Article by Andrew White, Gartner analyst

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