Tuesday 21 June 2016

Economist Events #FutureWorks2016 - The Productivity Puzzle

Today is the Economist's new annual conference, Future Works, replacing their previous Talent Summit and continuing the theme around digital and other disruptive change started in last year's talent management event.

The morning has focused on digital technology and its role in boosting productivity (although we have also heard about other factors eg migration - not just the upskilling of digital migrants - too).

The productivity puzzle was outlined by Sandra Polaski, formerly at the ILO.

UK productivity has stagnated post the global financial crisis.  Even the US has slowed down.  And let's not start on the EU!

Capital inputs have been significantly reduced.  Labour composition (quality, skills etc) has remained low.  Labour inputs (number of hours) has increased hugely.  The suggestion seems to be that we're avoiding investments in infrastructure and R&D and just using more cheap labour instead. 

Multifactor productivity - the residual - has also declined.  Is this that technological innovation is not actually as profound as the basic invention of the computer.  Or that technological innovations aren't diffusing out of leading organisations into the others, perhaps because the leading companies are controling use of these systems and platforms, putting up barriers to entry for other firms.

We've seen an increasing divergence in productivity and wages.  Sandra suggested that workers do understand this and that it reduces their motivation to work.  The ILO suggests that whereas we often believe that increases in productivity allow organisations to pay more, the link is the other way - increases in reward trigger motivation and hence allow productivity to rise.

This is why Britain still needs a pay rise.

We also discussed a number of issues relating to this.

Eg are we measuring productivity properly?  Are the measures developed for the steel age still relevant for the information economy?  Eg can we even count the numbers of hours people are working any more?

Ajaz Ahmed, CEO of AKQA (Glassdoor's third best employer) suggested that since productivity and efficiency don't matter to people today, the things we need to measure need to focus much more on things like beauty, serendipty etc - things which really do matter to people.   He suggested the key tool used by AKQA is a cultural barometer.


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