Page 34 - The Fourth Industrial Revolution

are fewer young adults, purchases of big-ticket items such as homes,

furniture, cars and appliances decrease. In addition, fewer people are likely
to take entrepreneurial risks because ageing workers tend to preserve the
assets they need to retire comfortably rather than set up new businesses.
This is somewhat balanced by people retiring and drawing down their

accumulated savings, which in the aggregate lowers savings and investment
rates.

These habits and patterns may change of course, as ageing societies adapt,
but the general trend is that an ageing world is destined to grow more
slowly unless the technology revolution triggers major growth in

productivity, defined simply as the ability to work smarter rather than
harder.

The fourth industrial revolution provides us with the ability to live longer,
healthier and more active lives. As we live in a society where more than a
quarter of the children born today in advanced economies are expected to
live to 100, we will have to rethink issues such the working age population,
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retirement and individual life-planning. The difficulty that many countries
are showing in attempting to discuss these issues is just a further sign of
how we are not prepared to adequately and proactively recognize the forces
of change.

Productivity

Over the past decade, productivity around the world (whether measured as
labour productivity or total-factor productivity (TFP)) has remained

sluggish, despite the exponential growth in technological progress and
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investments in innovation. This most recent incarnation of the productivity
paradox – the perceived failure of technological innovation to result in
higher levels of productivity – is one of today’s great economic enigmas that
predates the onset of the Great Recession, and for which there is no

satisfactory explanation.

Consider the US, where labour productivity grew on average 2.8 percent
between 1947 and 1983, and 2.6 percent between 2000 and 2007, compared
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with 1.3 percent between 2007 and 2014. Much of this drop is due to
lower levels of TFP, the measure most commonly associated with the

contribution to efficiency stemming from technology and innovation. The US
Bureau of Labour Statistics indicates that TFP growth between 2007 and

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