Where Digitization Is Failing to Deliver

It has become a truism that the pace of work is faster than ever, as digital technologies speed up communication and operational processes in a story of unending progress. But increased speed has not translated into increased rates of productivity growth. Since 2004, growth rates have slowed not just in the US but across the world. Commentators have questioned the way growth rates are measured, suggesting that the data fail to capture the effects of new products. But in a working paper published by the National Bureau of Economic Research in February, Chad Syverson, J. Baum Harris Professor of Economics at the University of Chicago’s Booth School of Business, argued that the slowdown in the rate of productivity growth is real. MIT Sloan Management Review asked Syverson what the implications are, and why the benefits of new technologies are not as straightforward as we think.

What do the data say about the pace of growth over the past decade?

The official productivity measures have shown that there’s been a slowdown in growth rates since about 2004. It seems pretty clear it started before the financial crisis and the Great Recession. Productivity growth since 2004 on average has been half of what it was for the decade previous. (Productivity is output per worker hour. In the end, it’s an efficiency measure: How good are you at converting inputs into outputs.)

If you believe the trend is real, the question is, why has productivity slowed? While you have all this talk about how much technology is marching us forward, the numbers just don’t show it. In fact, we’re in a period of unusually slow productivity growth.

There are a couple of explanations. One is that we really aren’t coming up with innovations at the rate we were before, at least for now. Why? Maybe because we’ve wrung out the easy gains from IT and other innovations, and now we’re in a period when it’s getting harder to find productivity-enhancing applications.

Another potential explanation is that the frontier is moving: The possibilities are there, but they aren’t being picked up, they aren’t diffusing as fast as they used to.