This is what BBVA Compass economists say in their latest research
December 17, 2016: Information technology is predicted to boost the US productivity growth rate, but digitization efforts may subdue compensation growth, BBVA Compass economists say in their latest research.
The productivity growth rate has significantly slowed to 0.5 percent over the last five years. Economists across the US are divided in their views on the impact of new technologies, big data processing and apps on productivity and growth. Some economists predict a steep uptick despite the current stagnation; others say that even with new innovations, economic growth will continue to slow due to existing structural headwinds, such as demographics, education, debt and income inequality.
BBVA Compass economist Shushanik Papanyan says the recent slowdown in US productivity growth rates has been structural in nature, and she sees the rate staying low beyond the current cyclical decline and slow post-Great Recession recovery.
“Additional economic efficiencies in production and resource allocation are likely to improve from digitisation, the use of digital information, and from big data processing, but the question that remains unresolved is whether digital innovations will boost the future path of productivity growth,” she said, summarizing the report, “Digitization and Productivity: Where is the Growth?”
Papanyan notes that even so, the economy benefits from the significant increase in the quality of products and services as a result of the digital era. However, the growing economic importance of automation, coupled with increased resource mobility, rapid globalization and technological advancements, may subdue worker compensation growth and keep inflation low.
“Technology today has a more comprehensive role in production than merely integrating resources in the factory,” Papanyan says. “Technology creates new resources with the cost of ownership of many very low and new levels of efficiency that can result in both lower wages and lower prices.”