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Last Updated on October 15, 2019

The Productivity Paradox: What Is It And How Can We Move Beyond It?

The Productivity Paradox: What Is It And How Can We Move Beyond It?

It’s a depressing adage we’ve all heard time and time again: An increase in technology does not necessarily translate to an increase in productivity.

Put another way by Robert Solow, a Nobel laureate in economics,

“You can see the computer age everywhere but in the productivity statistics.”

In other words, just because our computers are getting faster, that doesn’t mean that that we will have an equivalent leap in productivity. In fact, the opposite may be true!

New York Times writer Matt Richel wrote in an article for the paper back in 2008 that stated, “Statistical and anecdotal evidence mounts that the same technology tools that have led to improvements in productivity can be counterproductive if overused.”

There’s a strange paradox when it comes to productivity. Rather than an exponential curve, our productivity will eventually reach a plateau, even with advances in technology.

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So what does that mean for our personal levels of productivity? And what does this mean for our economy as a whole? Here’s what you should know about the productivity paradox, its causes, and what possible solutions we may have to combat it.

What is the productivity paradox?

There is a discrepancy between the investment in IT growth and the national level of productivity and productive output. The term “productivity paradox” became popularized after being used in the title of a 1993 paper by MIT’s Erik Brynjolfsson, a Professor of Management at the MIT Sloan School of Management, and the Director of the MIT Center for Digital Business.

In his paper, Brynjolfsson argued that while there doesn’t seem to be a direct, measurable correlation between improvements in IT and improvements in output, this might be more of a reflection on how productive output is measured and tracked.[1]

He wrote in his conclusion:

“Intangibles such as better responsiveness to customers and increased coordination with suppliers do not always increase the amount or even intrinsic quality of output, but they do help make sure it arrives at the right time, at the right place, with the right attributes for each customer.

Just as managers look beyond “productivity” for some of the benefits of IT, so must researchers be prepared to look beyond conventional productivity measurement techniques.”

How do we measure productivity anyway?

And this brings up a good point. How exactly is productivity measured?

In the case of the US Bureau of Labor Statistics, productivity gain is measured as the percentage change in gross domestic product per hour of labor.

But other publications such as US Today, argue that this is not the best way to track productivity, and instead use something called Total Factor Productivity (TFP). According to US Today, TFP “examines revenue per employee after subtracting productivity improvements that result from increases in capital assets, under the assumption that an investment in modern plants, equipment and technology automatically improves productivity.”[2]

In other words, this method weighs productivity changes by how much improvement there is since the last time productivity stats were gathered.

But if we can’t even agree on the best way to track productivity, then how can we know for certain if we’ve entered the productivity paradox?

Possible causes of the productivity paradox

Brynjolfsson argued that there are four probable causes for the paradox:

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  • Mis-measurement – The gains are real but our current measures miss them.
  • Redistribution – There are private gains, but they come at the expense of other firms and individuals, leaving little net gain.
  • Time lags – The gains take a long time to show up.
  • Mismanagement – There are no gains because of the unusual difficulties in managing IT or information itself.

There seems to be some evidence to support the mis-measurement theory as shown above. Another promising candidate is the time lag, which is supported by the work of Paul David, an economist at Oxford University.

According to an article in The Economist, his research has shown that productivity growth did not accelerate until 40 years after the introduction of electric power in the early 1880s.[3] This was partly because it took until 1920 for at least half of American industrial machinery to be powered by electricity.”

Therefore, he argues, we won’t see major leaps in productivity until both the US and major global powers have all reached at least a 50% penetration rate for computer use. The US only hit that mark a decade ago, and many other countries are far behind that level of growth.

The paradox and the recession

The productivity paradox has another effect on the recession economy. According to Neil Irwin,[4]

“Sky-high productivity has meant that business output has barely declined, making it less necessary to hire back laid-off workers…businesses are producing only 3 percent fewer goods and services than they were at the end of 2007, yet Americans are working nearly 10 percent fewer hours because of a mix of layoffs and cutbacks in the workweek.”

This means that more and more companies are trying to do less with more, and that means squeezing two or three people’s worth of work from a single employee in some cases.

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According to Irwin, “workers, frightened for their job security, squeezed more productivity out of every hour [in 2010].”

Looking forward

A recent article on Slate puts it all into perspective with one succinct observation:

“Perhaps the Internet is just not as revolutionary as we think it is. Sure, people might derive endless pleasure from it—its tendency to improve people’s quality of life is undeniable. And sure, it might have revolutionized how we find, buy, and sell goods and services. But that still does not necessarily mean it is as transformative of an economy as, say, railroads were.”

Still, Brynjolfsson argues that mismeasurement of productivity can really skew the results of people studying the paradox, perhaps more than any other factor.

“Because you and I stopped buying CDs, the music industry has shrunk, according to revenues and GDP. But we’re not listening to less music. There’s more music consumed than before.

On paper, the way GDP is calculated, the music industry is disappearing, but in reality it’s not disappearing. It is disappearing in revenue. It is not disappearing in terms of what you should care about, which is music.”

Perhaps the paradox isn’t a death sentence for our productivity after all. Only time (and perhaps improved measuring techniques) will tell.

Featured photo credit: Cathryn Lavery via unsplash.com

Reference

More by this author

Tucker Cummings

Writer and social media professional sharing productivity tips on Lifehack.

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Last Updated on August 10, 2020

15 Simple Things You Can Do To Turn Your Life Around

15 Simple Things You Can Do To Turn Your Life Around

Life can be difficult. It can seem like nothing goes your way and the world is against you. The world can be a very cruel and lonely place. But there are things that you can do to begin turning your life around.

Whether you’re in a job you hate, struggling with a loss, or just not on the path you expected, only you hold the key to turning your life around. Here are 15 simple things you can do to turn your life around.

1. Read Daily

Reading lets you escape to a different place within your mind. It can be relaxing and calming. And it helps stimulate brain activity and keeps you sharp.

Reading daily can help you spend time away from the problems of the day and allow you to escape into a world of endless possibilities. Changing your perspective can help you turn around your life, and reading is a great place to start.

Here’re some recommendations: 20 All-Time Best Motivational Books to Inspire You

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2. Put Your Goals in Writing

When thoughts are banging around in our heads, they can easily slip away. Walk from one room to another and you forget what you were doing!

Make sure your goals are concrete and written down. This will help you stay accountable to yourself and is the first step in completing your goal. By writing it on a piece of paper, you must put in the thought of how you should word it, what exactly you want to accomplish, and will make you consider if it’s truly worth it.

3. Prune Your Relationships

Too often, relationships can be destructive. This is often looked at through the scope of romantic relationships, but also consider life-long friends, family, and acquaintances. Are the people you spend time with bringing you down? Are they helping you achieve your goals or hindering? It can be difficult, but pruning your relationships can be the quickest catalyst in turning your life around.

4. Make New Friends

Don’t underestimate how a new person or group of friends in your life can change your outlook. Be open to meeting new people, both at work and in your personal life.

5. Get Healthy

When you feel great, good things seem to come your way. Working out helps you feel better about yourself and can help change your outlook on life. Eating right can help you have the energy to do more. Getting healthy can improve your entire outlook on life and help turn your life around.

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6. Start Saving

For many, financial struggle can weigh heavy and be the cause of many problems. Without a change of job or career, changing your financial situation will take time and effort. Start saving with each paycheck to help build toward your future. Even if it’s a small amount each check, consistency in saving can help you change your path in the future.

7. Start a Business

Working for others can be tough. You may be underemployed, under-utilized, and under-appreciated. Starting a business can help you take control of your financial future.

Understand that you don’t have to quit your current job to start a business. Find something you love and have skills at and do it in your free time. If you’re in creative services, freelance. If you’re great at carpentry, build tables to sell. If you are a talented painter or crafty, start an Etsy store.

You may find that your side passion business can turn into more. Or, if you have the opportunity and skills, take the plunge and go all in. Working for yourself is challenging, but a great opportunity to change your life.

Here’re some tips for you: How to Start a Small Business with Little to No Money

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8. Find Opportunities to Help Others

Helping others can change your outlook and help turn your life around. Changing the way you think about the world can play a part. But helping others can also open up doors you never had available. Being a good person can help you get out of a funk and can be the catalyst for change.

9. Learn a New Skill

When you have more skills, additional opportunities will be presented. If you’re tired of your blue collar job, take classes to learn computer skills. If you’re struggling to move up in your company, find a skill that makes you more valuable. And if you want financial freedom, learn a skill that can help you change your life. Knowledge is power.

10. Stop Watching TV

Watching TV can keep you distracted and take up a lot of time. Cutting out the time you spend watching TV and replacing it with more productive activities can help you accomplish more and stay focused.

11. Listen to Inspirational Content

You can learn much about yourself from others. Find inspirational and educational content that matches your needs and give it a listen. You may find that the advice from others in similar situations can give you the boost you need to change your life.

12. Stop Complaining

Negative thoughts and talk can turn people against you and make your outlook grim. Stop complaining so much and make the best out of your situation.

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13. Find or Rekindle Your Passion

Doing what you love can change your entire outlook on life. When you’re doing things you hate, you can be more stressed and make life much harder than it needs to be. Find things you’re passionate about and rekindle the love for what you enjoyed in the past. Doing what you love can turn your life around and make each day more rewarding.

14. Take a Vacation (or Staycation)

Sometimes, hitting the reset button is all it takes to improve your situation. Taking a vacation, or staycation, is a great way to get away from the stress of the daily grind and recharge your battery. A vacation can give you the perspective you need to change your life.

15. Re-evaluate Your Attitude

How you view the world will often reflect in how you treat yourself. Re-evaluate your attitude and ensure that you’re doing all you can to make the most out of every situation. A change in how you view your situation can often be the push that helps you change your life for the better.

More Tips to Help You Change Your Life

Featured photo credit: Conner Ching via unsplash.com

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