Maybe high wages drive improved productivity, and low wages keep productivity down

Productivity is in a slump because businesses aren’t investing in technology that improves productivity, say researchers. If wages go up and good workers are harder to find, businesses will have more incentive to make big-ticket investments that generate growth.

Neil Irwin reports for the New York Times:

Some historians believe that the industrial revolution began in Britain instead of elsewhere because comparatively high wages for British workers prompted companies to invest in labor-saving devices.

In this way of thinking about productivity, inventors and business innovators are always cooking up better ways to do things, but it takes a labor shortage and high wages to coax firms to deploy the investment it takes to actually put those innovations into widespread use….

In other words, instead of worrying so much about robots taking away jobs, maybe we should worry more about wages being too low for the robots to even get a chance.

Maybe We’ve Been Thinking About the Productivity Slump All Wrong.

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