Enhancing productivity is a key ingredient to higher economic growth and rising incomes. Covid has changed the way we live and work. The issue is how these changes will affect our productivity, both now and in future. In the current environment, it is difficult to forecast long-term economic growth, but there are two key channels through which Covid could affect productivity –accelerated digitalization and a reallocation of capital (e.g. machines and technological knowhow) between different firms and industries. Some incremental changes may seem trivial in the grand scheme of things, but they could have a measurable impact on productivity. It is crucial to identify them correctly and customize them appropriately to the domestic environment.
Visionary companies like Microsoft and Google already had detailed plans in place for their employees worldwide to work from anywhere much before the lockdowns occurred. They simply moved swiftly to execute their strategiesduring the pandemic, leading to an almost zero disruption to their businesses. The productivity of their employees also rose considerably during Covid. That is the direction in which all successful firms in tomorrow’s world will need to move. Ultimately, what is good for the organization is good for the economy as a whole, and it will enable the rebuilding oflargescale socioeconomic resilience.
There has been a spurt in recent investment in digital tools both in the public and private sectors. This ranges from videoconferencing to data-mining technologies, all of which will have a direct impact on productivity. As Covid recedes, firms that invested in intangible assets, such as digital technologies and patents are likely to witness higher productivity. Public policy needs to support such firms to the extent possible, as they are the ones who will ultimately contribute most to GDP.
Policy action influences how much resource reallocation occurs between firms, and thus productivity growth in the economy, but the direction remains unclear. For example, broad-based fiscal support during the current situation could boost productivity if it helps firms with the most potential to survive. On the flip side, it also risks keeping resources locked in less productive firms, which could constrain overall economic growth. The degree to which these forces offset one another cannot be accurately gauged.
An uneven global recovery in 2021 willprobably upset many of our ingrained beliefs about economic growth. Data, technology and public-private partnerships are keys to sustained economic development. This is also where innovation matters – new technologies have created cheaper and more reliable ways to generate missing socioeconomic data and leverage it for better decision making. However, at the root of it all remains productivity – both individual and organizational.To quoteNobel Laureate Paul Krugman, productivity isn’t everything, but in the long run it is almost everything.