December 05, 2016
Economists have been disappointed by the extraordinarily weak productivity growth of the last decade. Low productivity growth means that there is less room for improvements in living standards and more leisure.
Fortunately there may be an answer. Timothy Lee at Vox tells us that higher minimum wages are leading to more rapid automation. According to his piece, higher wages are pushing McDonald’s around the country to experiment with touchscreen ordering. This will raise productivity at McDonald’s and at other restaurants that adopt the technology.
While Lee for some reason views higher productivity as a bad thing, virtually all economists view productivity growth as the main determinant of living standards in the long-run. While productivity growth can displace workers, we know how to run macroeconomic policies (e.g. keep the Federal Reserve Board from raising interest rates and/or run larger budget deficits) to maintain full employment. So if Lee is right and higher wages are leading to more rapid productivity growth, this is great news.
Comments