Productivity improvements are almost always considered to be an unmitigated good. They help the overall economy grow by making more output out of a finite input. As an example, the move to computers from typewriters was quite a good productivity improvement. (Most) People could type documents faster with a computer than they could with a typewriter.
However, it is interesting to see how productivity is measured and managed today in the globalized single market. As an example, let us take software development. In the world pre-globalization and outsourcing, the cost to develop and maintain software in the US was a function of the price you had to pay a programmer in the US.
Today, you can hire a programmer from India to do the same thing at a third of the cost. And simple exchange rate and cost of living arbitrage means that the Indian programmer would be able to have a better standard of living even at this spectacular lower cost.
This seems like a no-brainer to most companies today, and lots of jobs are being shunted around to low cost locations around the world leading to improved margins or dramatically lower prices. However, this spectacular improvement in productivity for the global economy as a whole has some very pertinent local impacts.
Developed markets which have relatively high labour costs tend to have their jobs threatened by these low cost interlopers. In the 1980’s and 90’s this was the skilled manufacturing jobs that moved to China and South East Asia. In the 2000’s and this decade, the shift has been less labour intensive, but no less profound as low value IT jobs and back office processing moved to India and the Philippines.
The next steps will be a shift when relatively high value jobs, like management consulting and legal and financial advice get shifted to the lower cost countries.
A careful observer will state that these shifts are actually a good thing. Today, Apple is the most valuable company in the world. And while its products may be made in China, they are designed in the United States and the maximum value (30% margins) that is generated is reaped within the United States, with China getting the crumbs in the form of manufacturing margins of 3-4%.
However, this means that the developed world labour markets are in constant flux, with the employees in this world needing to constantly upgrade their skills or to perish in the low margin world of the outsourced.
Is this sustainable as a long term trend? And would this not be replicated when cheap Chinese labour is replaced by cheaper automated robots? I don’t have the answers, but I think its time people start thinking about them.
Blahla 