Productivity and the Pandemic
Across from my apartment, there’s a new restaurant with a new way of doing business. No one hands you a menu or takes your order; instead, you use the QR code taped to the table to see what’s available and choose what you want to eat. There’s a carafe of tap water on the table, along with four glasses; if you want to fill a glass, you do it yourself. To settle your bill, you can put your credit card details into the restaurant’s app — or, better yet from the restaurant’s point of view, you can use the app to establish an account, so on your next visit the bill will be handled automatically.
A year ago, before the COVID-19 pandemic, none of these practices was common in the United States. In most restaurants, collecting a customer’s payment required the server to make four separate visits to the table: once to present the bill; another to pick up cash or card and take it to the cash register; a third to bring the patron change or a credit card voucher; and then once more to collect the cash tip or the signed voucher. With fewer steps in the payment process, each server can handle more tables, allowing a restaurant to operate with less staff than before.
Something similar is happening in many different industries, raising the prospect of faster productivity growth economy-wide. This matters: in the long run, higher productivity — that is, using fewer workers and resources to create a given amount of output — is what makes economies grow. Some of the best-known scholars of productivity, such as Robert Gordon, have argued that there are no great innovations on the horizon that are likely to boost productivity growth like railroads, electricity, and expressways all did at various times in the past. This, obviously, would not bode well for raising living standards. My own view has been less pessimistic. As I pointed out in An Extraordinary Time, economists have a terrible track record when it comes to forecasting productivity improvements, which often arise unexpectedly: just because artificial intelligence and virtual reality haven’t moved the productivity numbers so far doesn’t mean they won’t revolutionize entire industries very soon.
Changes like those evident in my neighborhood restaurant are leading to speculation that the pandemic will bring a productivity revival. The Economist recently hypothesized that “The pandemic could give way to an era of rapid productivity growth,” and Greg Ip of the Wall Street Journal asserts that “much of what started out as a temporary expedient is likely to become permanent.” If they are right, we could be in for an odd sort of boom coming out of the pandemic, in which the economy grows smartly but unemployment remains high until workers find not just new jobs but new occupations that are in demand because of new ways of doing business.
Yet it’s also possible that the productivity gains from the pandemic turn out to be modest. While the server at my neighborhood restaurant saves time by skipping repeated visits to my table, she also misses out on the opportunity to describe the wonderful tiramisu or ask if I’d like an espresso to top off my meal. The QR code taped to the table may be efficient when it comes to taking my order, but it’s not an efficient way of maximizing my bill. That’s probably not good for the economy, although it may be good for me as a diner. I didn’t really need that dessert anyhow.Tags: COVID-19, restaurants, Robert Gordon