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Reversing the Decline in Productivity

If companies begin investing again in new technologies, workers will become more efficient.
By Mark Roberti
Sep 13, 2015

In May 2015, the U.S. Department of Labor published its first-quarter statistics. The report revealed that output per worker fell by 1.9 percent during that period. The steep decline was surprising, but it was part of an ongoing trend. During the past 10 years, worker productivity in the United States grew annually by just 1.4 percent—half the rate of the previous decade, according to the Brookings Institution.

One possible explanation for the decline is the reduction in investment in information technologies. Corporate spending on IT systems, as a percentage of gross domestic product, peaked at 4.6 percent in 2000, and has since been declining.

Why aren't U.S. companies investing in IT systems when they are sitting on $1.4 trillion in cash? There are likely several reasons. One, no doubt, is that recent financial crises have caused companies to be cautious. These days, it's difficult to know when the global economy will be rocked by, say, a major decline in the Chinese stock market or the potential of some country (Greece, perhaps?) defaulting on its loans and throwing the European Union into convulsions.

Another reason might be that IT investments don't have quite the bang for the buck that they once had. Think about a secretary in 1980. She (it was most likely a woman in those days) was typing letters on an IBM Selectric typewriter. If the boss wanted to make a change, she had to retype the entire letter. By 1990, she was using a PC, which allowed her to store templates (which could be quickly customized) and make corrections with ease. And within another decade, her PC was connected to the Internet and she could book the boss's travel, research any topic on which he (or she) wanted information, and do a whole lot more.

Today, all workers are digitally literate and connected to corporate IT systems around the clock via their laptops and smartphones. Manufacturing systems are highly automated and monitored. So investing in new systems is unlikely to deliver a significant return on investment.

But what if new technology enabled companies to do things that were simply not possible with desktop PCs, laptops, smartphones and existing software systems? What if they could track and manage all of their assets in real or near-real time? The answer is that businesses most certainly would invest in new systems. Radio frequency identification systems enable firms to do this. But the main reason that companies are not investing a huge pile of cash in RFID solutions is that they are not yet convinced the technology is a slam-dunk.

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