Is the Pace at Which Labor-Saving Technology is Entering the Workforce Accelerating?

Mark Thoma asks Is the Pace at Which Labor-Saving Technology is Entering the Workforce Accelerating?

There are various pieces of evidence suggesting that the answer is “no.” Most importantly, if the rate at which machines are replacing workers is increasing, then productivity growth—output/hours worked—should also be increasing. But it has been slowing.

One reason for slower productivity growth is diminished investment in capital goods—like machines—a trend that also doesn’t square with the acceleration hypothesis. …

Emphasis Mine

In other words, there is no acceleration in automation, but a constant growth. The cap on real wages has kept the incentive for capital investment low.

Inefficient use of human labour is cheaper than efficient use of automation. This means that productivity growth is slowing.

With the slowing of productivity growth, the opportunities for profitable investments are decreasing. This leads to a decrease in capital investment, and so the cycle continues into a global recession.

Stronger unions means stronger wages growth. This means that human labour has to be used more efficiently, and this drives technical and managerial innovation as well as capital investment.