Understanding Economic Growth

There are a couple of ways to increase economic growth - work longer or generate more from each hour worked.

I rarely speak of the day job here on the blog and nothing specific will be shared today.   Except that upon reflecting on the opening sentence of this post my observation is that having spent thirty-six years in virtually the same occupation the notion of embracing the latter versus the former is preferred.  Embracing change instead of casting blame on the change.  It's all about productivity.  Furthermore, I'd add that over the three and a half decades of business challenges margins have fallen substantially and to levels unimaginable in the 1980s.  Nevertheless, productivity gains have resulted in higher profits (and larger incomes) in the face of those shrinking margins.

So how can this be?  The short answer is technology.  Specifically, investing in new technology to leverage the hours to achieve productivity gains.  So while individuals in my line of work have benefited from this it hasn't necessarily resulted in more jobs.  To be fair the demographics point to the contrary - an actual shrinking population of professionals.  Whether that trend will flatten out or continue to decline I don't know.  I am certain it will not reverse itself.

Why is this important?  If you want to grow the economy one of the easiest ways to do so is to leverage technology.  The paradox is that this doesn't always result in more jobs.  Newer jobs perhaps - but not necessarily more jobs overall.  

Consider the fact that 5.6 million manufacturing jobs disappeared from 2000 to 2010.  Foreign trade was responsible for 13 percent of these job losses and productivity gains accounted for more than 85 percent.

Consider the future and the impact of autonomous (driverless) vehicles.  A self-driving truck would be a huge productivity gain to a company that relies on long-haul freight transportation to move materials and finished goods long distances.  It also has the potential to displace millions of individuals whose job it is to drive those vehicles today. 

Consider the surefire mechanism that can leverage economic output by simply increasing the number of immigrants with advanced skills whose output and profitability is the highest  and most efficient. 

This probably is not what supporters of the president-elect want to hear so it will be fascinating to watch from the sidelines to observe whether the new administration embraces the change and turns it to our country's advantage.  Or will there be more threats and assignment of blame.

Somehow I think I already know the answer - but I'll give them the benefit of the doubt for a spell.