More productivity, no benefits

Increasing labor productivity is generally hailed as a positive outcome of technological innovation. The production of more goods and services with fewer hours worked allows for both higher standards of living and decreased inflationary pressure, since wage increases can result from increased productivity and are not translated into higher costs for goods and services. Increased labor productivity has been promoted through government policy, such as tax breaks for capital investment and direct investment in technological innovation. It has also been promoted ideologically by both the left (Karl Marx for example) and the supply-siders. 

However, in a world of limited natural resources, and high unemployment, perhaps increased labor productivity is too much of a good thing. If increased labor productivity were translated into fewer hours worked as well as increased wages for workers, along with lower, or at least constant, prices for goods and services, it is possible that labor productivity improvements would be seen as a pure benefit. However, there would still be the issue of environmental degradation and resource depletion. It is also clear, particularly in the U.S., that increased labor productivity has not been a boon to workers.

Since 1980, average labor productivity in the US has increased 2 percent per year yet average worker pay has remained stagnant and the average number of hours worked has not decreased. The great promise that increased productivity would lead to increased wealth and leisure time seems to not have come true for the majority of workers. Increased productivity has led to increased profits instead of higher wages. Increased labor productivity has also led to increased levels of unemployment. Fewer workers are needed to produce the same amount of goods and services.

While unemployment levels in OECD countries are decreasing since their post-financial crisis highs, an important debate in the academic literature, as well as in popular literature and policy circles, is whether higher unemployment rates are the new norm. In other words, are the higher unemployment levels now experienced in many nations structural or cyclical: part of the structure of the economy or just a temporary result of the downturn?