The correct answer is that labor productivity goes up by 20%.
Labor productivity = output/worker.
At first, output = 50 and workers = 1.
After automation, output = 60 and workers = 1.
So labor productivity goes up, even though the worker is now doing a low-productivity job.
Labor productivity = output/worker.
At first, output = 50 and workers = 1.
After automation, output = 60 and workers = 1.
So labor productivity goes up, even though the worker is now doing a low-productivity job.
This little math example illustrates that as long as automation produces as much output as the people it replaces, labor productivity goes up, even if humans now do lower-productivity jobs.
If you wear a hat that says "MATH", you should understand this math.
If you wear a hat that says "MATH", you should understand this math.
This example demonstrates why low labor productivity growth is a sign that mass automation is not happening.
And indeed, our labor productivity growth since the Great Recession has been low!
And indeed, our labor productivity growth since the Great Recession has been low!
Earlier today, Andrew Yang suggested that low productivity growth could be the result of automation pushing people into low-productivity jobs.
But my little math example shows why this explanation for low productivity growth just doesn't work.
But my little math example shows why this explanation for low productivity growth just doesn't work.
Increasing automation throughout the economy should show up as accelerating labor productivity growth.
If we don't see accelerating labor productivity growth, it's a sign that we're not in the middle of a big wave of automation.
If we don't see accelerating labor productivity growth, it's a sign that we're not in the middle of a big wave of automation.
Now, it's possible that mass automation will happen in the future. If it does, we'll see it manifest as labor productivity growth, no matter what it does to wages and jobs.
It's just MATH!
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It's just MATH!
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