Productivity increases are important for economic growth, but they are also feared because people assume they lead to unemployment. A comprehensive new paper examines the impact of innovation in lower-income countries, finding that in many cases innovation can be beneficial for employment, although it varies significantly depending on a range of different factors.
Supercharging EU Productivity with Digital Technologies
While Europe steadily reduced the productivity gap with the U.S. after WWII, since the mid-1990s this gap has widened as EU productivity growth has stalled, leaving many European companies uncompetitive, incomes stagnant, and government finances in turmoil. If Europe is going to catch up it must follow the same path that drove U.S. productivity growth, in particular, more ubiquitous adoption of information and communication technology (ICT). ITIF hosted events with the Policy Network in London and the Lisbon Council in Brussels to assess the roots of the EU’s productivity and ICT adoption challenges, and to discuss a series of reforms designed to spur utilization and enhance growth.
Leveraging ICTs to Bolster European Productivity and Economic Growth
While most economists and pundits focus on Europe’s lag in ICT-producing industries, the greater concern is how much the Continent trails the United States in ICT usage and adoption. This is because, at the economy level, more than 80 percent of the benefits of technology come from its consumption, while just 20 percent come from its production. In fact, a major reason why European productivity levels trail those of the United States is that European enterprises, governments, and other organizations trail their American counterparts in ICT investment, usage, and adoption.
Worry About Slow Productivity Growth, Not Fast Productivity Growth
A recent report on US productivity growth confirms that we need more proactive public policies that encourage investment and growth. While many see new technology as responsible for high unemployment now or in the future, the truth is close to the opposite. Employment growth requires new investment and new investment goes hand in hand with productivity growth.
Putting Productivity First
Contrary to the beliefs of some advocates, evidence shows that technological change and productivity growth actually creates jobs in the mid and long term. And given the importance of the high-tech economy on global competitiveness, nations should embrace, not fear, technology.