Do Productivity Increases Contribute to Social Inequality?
Summing Up: Jim Heskett's readers are divided about whether corporate productivity increases make social inequality worse.
Does Social Equality Improve Productivity?
Inequality in our society is an important and growing issue. It prompted a debate among respondents to this month's column about the causes, specifically the role played by innovation leading to increased productivity without attendant economic growth. One respondent turned the topic on its head, posing a more interesting question of whether equality fosters productivity.
Several felt that innovation and productivity increases are leading to inequality. As Donald Shaw put it, "Technology development has always displaced some workers while creating new jobs more or less commensurate with the skills of the displaced workers. But things have changed since the technology is now able to think as well as perform tasks… It is not easy to convert today's manual laborers to thinking workers. And … technology has now taken over work that once was considered thinking and will increasingly do so."
Bill Barker agreed, in the process offering his solution: In the past, he wrote, the portion of the working population employed in agriculture dropped from 50 percent to less than 2 percent and was ameliorated by new employment opportunities in industry and services. "It is difficult to imagine how that will continue… there has to be some solution and that solution has to be governmental."
Several were more philosophical about the issue. As Wayne Lingard put it, "Productivity increases do create social unrest, it's a natural state which a country must get to, to move to the next level…" Ken Black commented: "Of course productivity contributes to social inequality, but there are a lot of non-productive people in various positions doing very well financially--so productivity alone is not a good gauge of social inequality." Romuald Kepa added: "The invention of the steam engine and resulting shifts in the society are great providers of insight Luckily, (the) world did not collapse …"
Others were not so sure that productivity is the primary culprit. Grace Duffy said that: "Long term cultural changes (she cited reduced education, greater dependence on drugs, and entitlement programs) are the basis for many of the disparities in employment. Productivity is necessary where not enough skills are available at the level required within a specific market…" Will Wilkin agreed: "The main reason for the rising inequality is that Free Trade has encouraged/required manufacturing to be offshored and outsourced … If we replaced the Free Trade policies with a Balanced Trade policy, using … (import licences) issued in the same value as our exports, (we'd balance our trade and) directly create millions of new US mfg jobs …"
Mark Clark expressed concerns about the link between inequality and democracy, advancing a proposal that might also address some concerns about productivity and inequality. As he put it, "A foundational step to fortify the health of our democracy may be a requirement of mandatory service-social service, infrastructure construction, teaching/mentoring or military according to individual talents and interests… A couple years contributed in the late teens or early twenties …"
The discussion moved several respondents to pose questions worth thinking about as we go forward. The most interesting was that of Armando del Bosque, who asked, "How about reversing the causality? Does Social Equality Improve Productivity?" Based on his experience with "companies (that) increase equality amongst their employees, their families and the communities they live/work in, (he has observed) dramatic productivity increments … no layoffs, no additional technology, 'just' increased employee engagement." Does he have something here? What do you think?
Inequality seemed to have been the byword of the year for 2013. Studies documented increases in the gap (or in a few studies, the opposite view) between rich and poor. Headlines, at least in the United States, typically focused on the share of wealth and income accumulated by the top .1 percent or 1 percent of the population. Attention also focused on the fact that people in the bottom 20 percent were not just in low-paying jobs. Unusually large numbers that wanted jobs had none and hadn't had paying work for months.
Couple that with the following: How many times in the past twelve months have you read or heard the comment by managers in the private and especially the public sectors that, "We need to do more with less?" The underlying assumption, of course, is that greater productivity will cure whatever ails an organization. Something good will come from it, either for an individual organization, a community, or an entire economy. Does that assumption hold?
Increased productivity from whatever source—investments in technology, better methods, or just more effort—without compensating growth will naturally lead to fewer labor inputs (and jobs) per unit produced. For example, in the US employment has increased much more slowly than either improved productivity or growth in the economy. One result may be the structural unemployment associated with long periods without a job and the obsolescence of skills that occurs with increasing rapidity in an information economy.
These concerns are not new. Jeremy Rifkin raised them in 1995 in his book, The End of Work. More recently, Jaron Lanier concluded that job-destroying productivity leading to inequality occurs when all of us contribute information about ourselves gratis on the Internet to a few high-tech entrepreneurs who get paid for the information and accumulate all its monetary value. He cites, as an example, the fact that 140,000 Kodak employees were replaced in large part by startups like Instagram (an Internet-based distributor of photos) a company with just 13 employees that was purchased last year by Facebook for $1 billion.
I've heard no one argue that the solution lies in reduced productivity. Rather the concern appears to be with how the fruits of increased productivity are distributed. Rifkin suggests that a solution lies in fostering what he calls a Third Sector, comprising the civil society. He proposes "Taxing a percentage of the wealth generated by the new Information Age economy and redirecting it into the neighborhoods and communities of the country, and toward the creation of jobs and the rebuilding of the social commons …." Lanier's solution lies in creatively using information technology to produce a blizzard of "nanopayments" to all of us who supply valuable information gratis to Facebook and other information exchanges that have expropriated value from both the employed and unemployed of our society.
Are productivity increases contributing to social inequality? At what point does inequality become a threat to democracy (and the lives of the 1%)? Is this something that market mechanisms can resolve? Or will responses like those Rifkin proposes be the answer? Or are these just 2013's issues of the day? What do you think?
To Read More:
Jaron Lanier, Who Owns the Future?, Simon & Schuster, 2013
Jeremy Rifkin, The End of Work: The Decline of the Global Labor Force and the Dawn of the Post-Market Era, Jeremy P. Tarcher/Penguin, 1995