While the rapid spread of technology and automation poses risks, especially for black and Hispanic workers who are among the most vulnerable to mass displacement, the spending madness could be a boon for Biden. The President and the Federal Reserve have pushed to increase productivity and keep the economy going amid growing concerns about hurdles like disappointing job growth and a potential rise in inflation, which could trigger rate hikes. stifling interest.
“There is a real wake-up call after a decade of slumber” in business investing, said Skanda Amarnath, director of research and analysis at Employ America, a nonprofit group that advocates for workers. “It’s a healthy and welcome development. “
Biden has been promoting his plans to spend billions more to strengthen America’s infrastructure, which is crucial to the country’s economic health and long-term competitiveness and key to creating better-paying jobs.
Productivity gains, disappointing since the mid-2000s, are at the heart of this effort, since they are linked to increases in real wages. If technological investments boost workers’ output, it can create an ideal point where firms are able to deliver goods and services more efficiently and where people can afford to buy what those firms produce.
“Automation is going to be absolutely critical to competitiveness,” said Gregory Hayes, CEO of Raytheon Technologies, on a Tuesday call from the Business Roundtable, a group of CEOs of major US companies that conducted the investigation.
If companies keep up the pace of their investment in information processing equipment for the rest of the year, that would rise to $ 610 billion, up from $ 494 billion annualized in the first quarter of 2019, a jump by 23.5%. This is more than double the rate of increase in investment in the first quarter of 2018 compared to the first three months of 2017, following Trump’s tax cuts.
While business spending on technology declined in the first quarter of 2020, the decline has been less dramatic than in the past two recessions. Despite this, the first quarter of this year saw the largest percentage increase since the 1970s, year over year, in nominal dollars spent and the largest inflation-adjusted increase in at least 2002, period for which comparable data are available.
Investments in broader categories of intellectual property equipment and products, which would include software and artificial intelligence, are also on the rise.
But economists warn that it is too early to say whether the investment boom in recent months will continue.
“You’ve had a nice push here in technology investment,” said Michael Feroli, chief US economist at JPMorgan Chase. “Some of it may just be transient as we rearrange the workplace for remote arrangements. “
The table is also more complex than some of the numbers at the top of the page suggest. There are areas where business spending has not been as strong; structural investments like new factories – a bullish sign for the economy – have yet to gain the same momentum as other areas.
And investments in automation risk slowing job and wage growth over time as workers are displaced.
Daron Acemoglu, a professor at the Massachusetts Institute of Technology who studies the effects of automation on work, said it was very important that technology either make it easier for people to do their jobs or replace them.
“The recovery can be fueled by technologies that automate more and more jobs, or it can be fueled by technologies that create opportunities for workers and find ways to get them back into the workforce,” he said. -he declares. “The first will lead to a recovery that will leave a lot of workers behind. “
Acemoglu warned that tax policy is making companies replace workers by making it more expensive to employ people than to buy machines, even if that doesn’t necessarily even increase production.
“Strict regulation won’t work, but there are ways in which governments can steer innovation efforts in a more socially beneficial direction,” he said.
Black and Hispanic workers are overrepresented in jobs that could be cut through automation, such as truck drivers, cooks and cashiers, according to a Brookings Institution study led by Kristen Broady.
Policy makers and businesses “should consider avenues for these workers to receive the training necessary to work with automation or move into a new job or field if necessary,” Broady said.
But there could also be counterintuitive advantages to better technology. Because America’s population ages, the workforce is expected to shrink over the next decade, said Susan Lund, head of the McKinsey Global Institute, the company’s economic research arm.
“We are actually entering an era of labor shortage, so even the automation that replaces jobs doesn’t appear to be a threat or a problem at the moment,” she said, although she recognized that this could change over time. “The question is, does this open up opportunities for employees to do more meaningful work?”
Higher productivity should also help ensure that higher wages lead to more economic benefits for workers, rather than potentially fueling inflation. A recent McKinsey study found that productivity could increase by more than a percentage point each year through 2024 as technology investments increase.
“A lot of people see productivity growth at the expense of the workforce,” said Amarnath of Employment America. “I think that’s missing the point. What counts as progress is the ability to deliver more stuff to more people without forcing people to work terrible weeks of work. “
“Reduced costs, like layoffs, generally reflect underinvestment,” he added.