AEI’s Jim Pethokoukis summarizes empirical evidence from McKinsey, MIT’s Erik Brynjolfsson et al., and Capital Economics showing multi-decade-long delays in the full implementation of innovations. McKinsey reminds us that “changing organizations is hard work, and rising competitive pressure … was a key catalyst for change in those industries that saw the biggest jumps in productivity.”
Today’s slow productivity growth likely stems from:
A slowing of the initial rapid adoption of the internet
Surplus labor, increased uncertainty, and reduced investment during the recession
Increased regulation in the aftermath of the 2008 to 2010 Democratic control of the government
Constraints in the supply of properly trained talent
A tighter supply of labor, the gradually training of talent, and a slowing pace of increased regulations, together with the gradual implementation of IT-related innovations—the first wave of artificial intelligence, for example—may portend higher productivity to come.
Source: “Solving the Productivity Puzzle: The Role of Demand and The Promise of Digitization,” McKinsey Global Institute.