Why Your Facebook Habit At Work Makes Economists Worry

Sep 5, 2016
Originally published on September 6, 2016 10:45 am

Productivity, a key measure of the economy's health, has been growing more slowly in recent years — and it has dropped for the past three quarters. Can Facebook and other social media distractions on the job be partly to blame?

Growth in the U.S. economy has been frustratingly slow during the recovery from the Great Recession. And it has fueled a lot of political discussion this year. One characteristic of that slow growth has some economists scratching their heads and others promoting grand theories to explain it.

The mystery for economists is exactly why the productivity of U.S. workers has stagnated in recent years. Their ability to increase their output per hour has been a pillar of economic growth.

Princeton professor Alan Blinder says productivity may sound a little bit boring but, he says, "that is the well from which wages come and wages are, for most people, the well from which their standard of living comes."

If that well runs dry — as it nearly has — you're in trouble. If you can't produce more output in every hour you work, your employer can't afford to give you a raise. And if you don't get paid more, your standard of living stagnates.

Blinder says during most of the past century, U.S. workers increased their hourly output by about 2.3 percent a year, and at that rate, standards of living rise rapidly.

"It takes about a generation or so to double your income," he says.

So each successive generation of Americans had a standard of living roughly double what their parents did.

But, since the turn of the century, productivity growth has been disappointing. And in the in the past five years, it's has grown at a record slow pace — less than half a percent a year.

"If this doesn't change, our standard of living is going to barely grow over the next 30 years. That's a horrible prospect," Blinder says.

For the record, the professor doesn't think that will happen.

He does think he knows one reason the productivity of U.S workers hasn't been increasing recently: Businesses aren't investing enough in better tools for those workers, such as new computer-aided machines, or better-organized workplaces.

Blinder says one would think companies would be doing that. In recent years, they've made record profits, but they've been slow to reinvest them. And even if companies don't have cash, they can still borrow and invest at record low interest rates.

So what's stopping them?

"I'm kind of baffled," Blinder says. "I've been scratching my head a lot to try to figure out what's going on and I haven't succeeded."

Could it be that companies are still cautious after having been burned by the Great Recession? Blinder is doubtful. He says when someone offers that explanation he asks, "Well then how come they're hiring so many people?"

Economist Robert Gordon of Northwestern University thinks he knows the answer. He says companies are not investing because there are no new "game changing" innovations to invest in — real, transformative innovations like electricity, the internal combustion engine and jet travel — innovations that raised the productivity of American workers in the last century.

But, you might ask Gordon, what about computers and the Internet?

"The main benefits of the IT revolution have already occurred," he says. "There just are not as many fruitful ways to invest."

Gordon says since the late 1990s, investment in computer equipment has fallen by half. "And my diagnosis is that people have the computers they need," he says.

But, he says, it's not that Silicon Valley isn't busy. "Don't get me wrong, I'm not saying there's no innovation, I'm talking about the impact of it," he says.

Gordon says the current crop of innovations, like smartphone apps, may be making life easier or more fun, but they're not making workers significantly more productive.

Blinder goes a step further, listing some distractions that may subtract from productivity: "Things like ... tweeting, Snapchatting, things that to me are unlikely to raise industrial productivity and may, by the way, reduce that. I'm thinking of things like Facebooking when on the job and other things like that."

But what about advances in artificial intelligence or self-driving vehicles? Gordon says their impact on worker productivity is still a long way off. He says productivity growth is likely to be slow for the next 25 years and suggests it will be 50 years or more before autonomous vehicles are fully integrated into the society.

But Gordon says that measures of industrial productivity have never captured all the advancements in quality of life that come from innovation: "The value of the conquest of infectious diseases, infant mortality and the removal of horse waste from the streets when automobiles replaced horses."

Both Gordon and Blinder agree that boosting productivity remains the key to boosting incomes and U.S. growth, and one long-term answer is better-educated workers.

Copyright 2016 NPR. To see more, visit http://www.npr.org/.

AUDIE CORNISH, HOST:

Could your Facebook habit or online shopping be holding back the American economy? Some economists think they could be contributing factors to a larger problem. In the past decade, the productivity of U.S. workers has stagnated. And over the past 12 months, it's actually declined. As NPR's John Ydstie tells us, that's a big deal.

JOHN YDSTIE, BYLINE: OK, Audie - just a minute. I'm right in the middle of buying some window blinds online - sun keeps shining on my TV. OK - just entering my credit card data now. Done.

Where were we? Oh, right - is shopping and socializing online while at work cutting into the productivity of U.S. workers? We will get to that issue in a minute.

But first, I asked Princeton economist, Alan Blinder, what he thinks is holding back productivity. He says, it's not totally clear, but productivity is really important.

ALAN BLINDER: That is the well from which wages come, and wages are, for most people, the well from which their standard of living comes.

YDSTIE: Blinder says, the ability of U.S. workers to increase their output per hour has been a pillar of U.S. economic growth. Innovations, like these power textile looms - preserved at a national park in Lowell, Mass., boosted the productivity of workers in the 1800s.

Blinder, a former vice chair of the Federal Reserve, says during much of the last century, U.S. workers increased their hourly output by about 2.3 percent a year. Doesn't sound like much, but at that pace, he says, wages and standards of living rise rapidly.

BLINDER: It takes about a generation or so to double your income.

YDSTIE: So for much of the last century, each new generation of Americans had a standard of living roughly double what their parents did. But for the last 10 years, productivity growth has been disappointing. And in the past five years, it's grown at a record-slow pace, less than half a percent a year.

BLINDER: If this doesn't change, our standard of living is going to barely grow over the next 30 years. That's a horrible prospect.

YDSTIE: Blinder says one big reason productivity hasn't been increasing recently is because businesses aren't investing enough in things that make workers more efficient, like new tools in buildings. You'd think companies would be doing that, he says. After all, in recent years, U.S. firms have made record profits. They've just been slow to reinvest them.

BLINDER: I'm kind of baffled. I've been scratching my head a lot to try to figure out what's going on, and I haven't succeeded.

YDSTIE: But economist Robert J. Gordon of Northwestern University thinks he knows the answer. He says companies are not investing because there are no new game-changing innovations like the ones that spread through the economy 100 years ago.

ROBERT J. GORDON: Electricity, the internal combustion engine, chemicals, the conquest of infectious diseases.

YDSTIE: And let's not forget air travel.

(SOUNDBITE OF ARCHIVED RECORDING)

UNIDENTIFIED MAN: You are now free to move about the country.

YDSTIE: Just think about it. The speed of air travel hasn't increased in over half a century. Business investment in these great innovations raised the productivity of American workers in the last century up until about 1970.

But you might ask, what about computers and the internet? Gordon says, absolutely, they boosted U.S. productivity from about 1995 to 2005. But he says...

GORDON: ...The main benefits of the IT Revolution have already occurred. There just are not as many fruitful ways to invest.

YDSTIE: As evidence, Gordon points out that since the late 1990s, investment in computer equipment has fallen by about half.

GORDON: My diagnosis is that people have the computers they need.

YDSTIE: It's not that Silicon Valley isn't busy creating new things, he says.

GORDON: I'm not saying there's no innovation. I'm talking about the impact of it.

YDSTIE: So innovations, like apps for your smartphone, may be making life easier or more fun, says Gordon. But they're not making workers more productive.

And Alan Blinder says that they may be eroding productivity.

BLINDER: I'm thinking of things like Facebooking when on the job and other things like that.

YDSTIE: Actually, Professor Gordon argues there's no definitive evidence that personal internet activity on the job is undercutting productivity. He says it's just as likely people are working more because of the web. For instance...

GORDON: People are constantly exposed to work-related email away from the office.

YDSTIE: But that doesn't change Gordon's basic belief that a dearth of breakthrough technologies will drag down productivity growth for at least the next 25 years. He says there are some promising advances like artificial intelligence or self-driving vehicles. But, he says, they are decades away from making a big economy-wide impact.

John Ydstie, NPR News, Washington. Transcript provided by NPR, Copyright NPR.