This analysis is written by Bloomberg Intelligence Chief Economist Michael McDonough. It appeared first on the Bloomberg Terminal.
A gradually improving U.S. economy coupled with rising wages may help finally push productivity higher. At the same time, this shift may also hasten technology-led labor market disruptions.
U.S. productivity-growth is starting to rebound and it is no coincidence that this is occurring at a time when the economy arrives at full employment. This should start amplifying wage pressures, making workers more expensive. To boost productivity, businesses will take action to more aggressively optimize output relative to increasing labor costs. While it is still too soon to declare that this trend is firmly underway, there are compelling signs that it is starting to emerge.
Amazon.com Inc. recently unveiled a brick-and-mortar store without cashiers or checkout counters, foreshadowing the potential disruption still to come for the U.S. labor market. About 3.5 million cashiers are employed across the U.S. in a variety of retail sectors, according to the Bureau of Labor Statistics. Potential disruption over the near-term goes far beyond retail. Before self-driving technology finds its way into passenger vehicles it will likely be implemented in the U.S. trucking industry. Otto, a company recently acquired by Uber, has already used a self-driving truck to deliver 2,000 cases of Budweiser from an Anheuser-Busch facility in Loveland, Colorado, to Colorado Springs. There are about 3.5 million professional truck drivers in the U.S., according to the American Trucking Association.
Alongside the nascent rise in productivity, companies are beginning to show a stronger interest in artificial intelligence, the technology at the center of the debate. In the fourth quarter of 2016, 191 company transcripts published on the Bloomberg Transcript wire mentioned “artificial intelligence,” up from 44 in 4Q 2015 and 17 in 4Q 2014. As wage costs continue to rise, the introduction of labor-disruptive technologies could eventually shift the political debate to the skills-imbalance of the U.S. labor market from what President Trump perceives as unfair trade deals.
Rather than imposing tariffs on some of the country’s trading partners, Trump’s administration would probably do more for industry by introducing reforms elsewhere to help future-proof the U.S. economy. In the near-term, these should include a lower corporate tax rate and measures to attract highly-skilled workers from overseas to fill gaps in skilled-labor positions. Over the long-term, Trump may want to consider incentivizing vocational schools and science, technology, engineering and math degrees in the U.S. This kind of stimulus could also help strengthen high-tech manufacturing, where the U.S. still maintains a strong competitive advantage, and better prepare the country for potentially disruptive technologies.
A return to productivity growth, along with access to a growing supply of skilled labor, could also go a long way toward reaching Trump’s ambitious goals for economic growth.
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