The American economist Robert Solow, who died on December 21, 2023, noted, in his seminal work, that the contributions of capital and labor to growth, as measured, were weak and left a large “residual” (the “Solow residue”). Attributed to technical progress, this residue constituted above all, according to him, the measure of our ignorance.
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For several years, in France but also in the United States and in a number of developed countries, the growth rate of labor productivity measured in this way has declined sharply. Already in the 1980s, Solow noted the paradox that computers were everywhere except in productivity statistics. To explain it, the most optimistic mentioned the time needed to learn new technologies.
Robert Gordon spoke of it as a secular phenomenon and a break with the period of great innovations bringing exceptionally strong growth. Without denying the importance of the technological changes underway, he reviewed what he calls the “headwinds”. Namely the reduction in hours worked per capita due to the aging of the population and the development of part-time work, the relative decline in education and its increasing cost, the widening inequalities of income and assets, the cost of the ecological transition and the weight of public debt.
“Apparent” productivity
Stopping solely at the contribution of new technologies is in fact an error of assessment. The complexity of the problem comes from the fact that the measurement of labor productivity reflects, of course, the progress of techniques, but also the mode of operation of the economy. Statisticians also speak of “apparent” labor productivity, to indicate that adjustments in employment and production are not synchronous.
All innovation is, as the Austrian economist Joseph Schumpeter (1883-1950) indicated, a process of “creative destruction”. But destruction and creation are neither concomitant nor instantaneous, as John Hicks teaches us in Capital and Time (Clarendon Press, 1973, untranslated). Most often, the costs of building new production capacities, including the costs of acquiring new skills, are higher than those of the old capacity.
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At constant resources, for the same investment in cost, the final production capacity temporarily decreases, before the reduction in the costs of using new production capacities (which justifies their implementation) allows it to increase again. If real wages remain fixed, employment declines. If real wages fall, unemployment is avoided, but labor productivity falls. Generally, employment and productivity can therefore decrease, before the fall in the costs of using new equipment, chosen because it is more efficient, allows them to increase again. There is nothing paradoxical about this development, and any fall observed should be transitory.
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2024-01-06 11:46:37
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