So does increasing productivity really destroy jobs?

An automated car factory. Image: Getty.

There’s been a lot of debate about productivity in the last couple of mnonths, off the back of our new report on the ‘long tail’. In and amongst this discussion, one thorny question that has been raised is whether improving productivity is bad for inclusive growth. In particular, do improvements in productivity come at the cost of jobs?

The concern about these issues is understandable – in some sectors, improvements in productivity have come through the introduction of machines which destroy jobs. Manufacturing is a case in point. There are many fewer people employed in manufacturing today than in the past – 4m, which is 60 per cent fewer than 1978. What is less well known, however, is that the amount that UK manufacturing produces has actually gone up in that period by 17 per cent, as a result of improvements to productivity.

There are two reasons why productivity improvements don’t mean job losses across the economy. The first is that, while the sectors that have been responsible for productivity growth in recent years have not been directly responsible for jobs growth, they have spurred employment in other sectors. As the chart below shows, ‘exporting’ sectors (those that sell to a regional, national or international market), for example in the manufacturing and finance sectors, have seen large productivity growth but a fall in employment.

Those sectors that have been responsible for employment growth, on the other hand, tend to be local services: accommodation and food services, and arts, recreation and entertainment. These firms, as our briefing shows, have seen little or no productivity growth in recent decades. The one clear exception to this is information and communications, which has managed to provide both productivity and employment growth.

But the performance of these sectors is linked. While exporting businesses don’t create jobs directly, research suggests that the wage-increases they create through productivity growth also increases demand for local services, which in turn boosts employment in these sectors. This is known as the multiplier effect.

Growth in productivity and jobs, 1990-2017. Source: ONS.

The second reason is that these fears are based on what the economy looks like today, rather than what it will be tomorrow. Different sectors grow and decline through time; and it’s the rise of new sectors that historically have more than replaced jobs lost in those declining ones.

Looking at 100 years of economic development in UK cities, as we did in Cities Outlook 2018, shows this. There have been huge changes in the economy over that period, including large increases in productivity and an unabated rise of automation. Despite this, there are 60 per cent more jobs in urban Britain today than there were in 1911. And few would argue that we aren’t better off than our great-grandparents.


Increases in productivity may well mean that jobs decline in some sectors. It’s easy to envisage that retail will employ fewer people in 10 years’ time than it does today. But these productivity improvements also create new opportunities, new types of economic activity and new jobs. And they ultimately lead to improvements in standards of living – again, compare life in 1911 to today.

While this is good for the economy overall, it obviously isn’t good for individuals who lose their jobs as a result of these changes. The challenge, then, for policy makers, is not only to address the UK’s poor recent productivity performance – it is to ensure that people who miss out can benefit from the new jobs that this growth would create.

Paul Swinney is head of policy & research at the Centre for Cities, on whose blog this article first appeared.

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What does the fate of Detroit tell us about the future of Silicon Valley?

Detroit, 2008. Image: Getty.

There was a time when California’s Santa Clara Valley, bucolic home to orchards and vineyards, was known as “the valley of heart’s delight”. The same area was later dubbed “Silicon Valley,” shorthand for the high-tech combination of creativity, capital and California cool. However, a backlash is now well underway – even from the loyal gadget-reviewing press. Silicon Valley increasingly conjures something very different: exploitation, excess, and elitist detachment.

Today there are 23 active Superfund toxic waste cleanup sites in Santa Clara County, California. Its culture is equally unhealthy: Think of the Gamergate misogynist harassment campaigns, the entitled “tech bros” and rampant sexism and racism in Silicon Valley firms. These same companies demean the online public with privacy breaches and unauthorised sharing of users’ data. Thanks to the companies’ influences, it’s extremely expensive to live in the area. And transportation is so clogged that there are special buses bringing tech-sector workers to and from their jobs. Some critics even perceive threats to democracy itself.

In a word, Silicon Valley has become toxic.

Silicon Valley’s rise is well documented, but the backlash against its distinctive culture and unscrupulous corporations hints at an imminent twist in its fate. As historians of technology and industry, we find it helpful to step back from the breathless champions and critics of Silicon Valley and think about the long term. The rise and fall of another American economic powerhouse – Detroit – can help explain how regional reputations change over time.

The rise and fall of Detroit

The city of Detroit became a famous node of industrial capitalism thanks to the pioneers of the automotive age. Men such as Henry Ford, Horace and John Dodge, and William Durant cultivated Detroit’s image as a centre of technical novelty in the early 20th century.

The very name “Detroit” soon became a metonym for the industrial might of the American automotive industry and the source of American military power. General Motors president Charles E. Wilson’s remark that, “For years I thought what was good for our country was good for General Motors, and vice versa,” was an arrogant but accurate account of Detroit’s place at the heart of American prosperity and global leadership.

The public’s view changed after the 1950s. The auto industry’s leading firms slid into bloated bureaucratic rigidity and lost ground to foreign competitors. By the 1980s, Detroit was the image of blown-out, depopulated post-industrialism.

In retrospect – and perhaps as a cautionary tale for Silicon Valley – the moral decline of Detroit’s elite was evident long before its economic decline. Henry Ford became famous in the pre-war era for the cars and trucks that carried his name, but he was also an anti-Semite, proto-fascist and notorious enemy of organised labor. Detroit also was the source of defective and deadly products that Ralph Nader criticized in 1965 as “unsafe at any speed”. Residents of the region now bear the costs of its amoral industrial past, beset with high unemployment and poisonous drinking water.


A new chapter for Silicon Valley

If the story of Detroit can be simplified as industrial prowess and national prestige, followed by moral and economic decay, what does that say about Silicon Valley? The term “Silicon Valley” first appeared in print in the early 1970s and gained widespread use throughout the decade. It combined both place and activity. The Santa Clara Valley, a relatively small area south of the San Francisco Bay, home to San Jose and a few other small cities, was the base for a computing revolution based on silicon chips. Companies and workers flocked to the Bay Area, seeking a pleasant climate, beautiful surroundings and affordable land.

By the 1980s, venture capitalists and companies in the Valley had mastered the silicon arts and were getting filthy, stinking rich. This was when “Silicon Valley” became shorthand for an industrial cluster where universities, entrepreneurs and capital markets fuelled technology-based economic development. Journalists fawned over successful companies like Intel, Cisco and Google, and analysts filled shelves with books and reports about how other regions could become the “next Silicon Valley”.

Many concluded that its culture set it apart. Boosters and publications like Wired magazine celebrated the combination of the Bay Area hippie legacy with the libertarian individualism embodied by the late Grateful Dead lyricist John Perry Barlow. The libertarian myth masked some crucial elements of Silicon Valley’s success – especially public funds dispersed through the U.S. Defense Department and Stanford University.

The ConversationIn retrospect, perhaps that ever-expanding gap between Californian dreams and American realities led to the undoing of Silicon Valley. Its detachment from the lives and concerns of ordinary Americans can be seen today in the unhinged Twitter rants of automaker Elon Musk, the extreme politics of PayPal co-founder Peter Thiel, and the fatuous dreams of immortality of Google’s vitamin-popping director of engineering, Ray Kurzweil. Silicon Valley’s moral decline has never been clearer, and it now struggles to survive the toxic mess it has created.

Andrew L. Russell, Dean, College of Arts & Sciences; Professor of History, SUNY Polytechnic Institute and Lee Vinsel, Assistant Professor of Science and Technology Studies, Virginia Tech.

This article was originally published on The Conversation. Read the original article.