Productivity Is Not The Enemy

Many supermarkets seem to be finding that the hoped-for labor savings from self-checkout machines aren’t materializing. The impulse among some progressives to cheer this as a pro-labor development is, I think, a big mistake. It’s absolutely true that firms seek to take advantage of productivity improvements to lay workers off and that we should feel very bad for people who lose their jobs. This is why progressives must and do support a social safety net and generous provision of social services.

But if you look back at American history and the economy as a whole, you’ll see that it’s simply not the case that slow productivity growth has been good for workers. Quite the contrary. Workers have been much worse off since the Great Productivity Slowdown of the 1970s (see Krugman’s The Age of Diminished Expectations) and the best period within the bad period was the mini-boom in productivity of the late-1990s.

Technological change clearly does lead to firm-level layoffs and individual job losses. But economy-wide job losses are driven by inadequate aggregate demand and poor macroeconomic policy. When President Obama flirted with the idea that productivity increases explain high unemployment he was making a mistake. Indeed, one thing that should worry us about the persistence of mass unemployment is that with so many excess workers around firms have less incentive than ever to spend time worrying about finding ways to make their workforce more productive. I suspect that’s part of the issue with the self-checkout machines. Being a cashier is not a particularly fun, glamorous, or high-paying job. In a healthy labor market, lots of cashiers would be looking for work elsewhere and there’d be lots of pressure to raise wages. Shifting to an equilibrium with fewer, but higher paid, staffers would make a lot of sense. But with double-digit unemployment for non-college workers, why bother?