Would you rather have an iphone 5 or running water? It might seem like a “well, duh,” kind of question, but it gets to the heart of something important about the jobs and growth debate right now.
As everyone knows by now, last week’s unemployment figures were the best we’ve seen in about 3.5 years. But 7.8 percent unemployment is still much higher than what we’re used to in this country. Meanwhile, wages are stubbornly flat, which is a serious problem in an economy that’s 70 percent dependent on consumer spending. No raise, no shopping spree, no major job growth. And the problem of the shrinking middle still isn’t getting better, either; median household wages are less than what they were in 2009.
Which takes me back to that first question, one that was posed recently by Northwestern professor Robert Gordon, who has an interesting new economics paper, entitled “Is US Economic Growth Over?” which looks at how we may be at a change point in terms of tech-driven productivity and job growth in this country. We all think gadgets are great, and the iPhone 5 has certainly done just about the best retail sales of any product you can think of recently. But does all that add up to real, sustained economic growth for America as a whole? Gordon says not so much. Despite all the hopes pinned on Silicon Valley, and all the politicaltalk about unleashing “innovation” to kick start the economy, there are good reasons to think that the industrial, educational and gender equality changes of the 1950s, 60s and 70s had a bigger impact on income growth and prosperity than the information age has – or will. And, those earlier changes are mostly tapped out.
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Gordon points out that productivity growth (which underlies overall economic growth) was much higher prior to 1970 than after, and that more broad based economic growth has been seen as a result of industrial revolution inventions like electricity, the internal combustion engine and widespread indoor plumbing than from computer chips. Social media? It’s just a drop in the bucket in terms of economic growth. What’s more, technology is making the wage gap worse since it creates so much labor bifurcation – software is eliminating white-collar jobs, and Chinese factory gigs are going to robots.
Where’s this all headed? And what’s to be done? To learn more, check out my Curious Capitalist column in this week’s Time Magazine.