Productivity Growth and Full Employment at Wawa

I’ve been looking for a pretext to write about touchpad ordering systems for a while, and Mitt Romney waxing enthusiastic about Wawa gives me just the opportunity I need:

So I think these touchscreen ordering pads really are pretty amazing. And one question to ask is why isn’t this kind of technology in wider use?

One answer I would give is that as a society we’ve lost sight of the important symbiotic relationship between productivity growth and full employment. In fact, it’s become very hip and high status to just gloss over short-term full employment considerations entirely and say we all need to be talking more about innovation. But while innovation is of course excellent, looked at properly full employment is one of the greatest spurs to innovation we have.

Not only does full employment give workers bargaining power to insist on higher pay or better working conditions, it creates circumstances in which firms that are good at identifying and deploying labor-saving technology prosper.

In principle, of course, deploying machines to cut down on labor use could be helpful even in a depressed economy. Staffing levels, like wages, are somewhat sticky. It’s much easier and more pleasant to deploy new technology to allow you to increase sales without increasing staff size than to deploy new technology in order to lay off existing staff. Among other things, firms typically need a spur to do anything risky. Full employment and strong aggregate demand do a great job of incentiving risk taking. The sales are out there if you can find them, but if you don’t innovate you’re going to be stuck with soaring labor costs. So why not find some exciting new technology?

In a depressed labor market, instead, we all sit around talking about innovation while in practice front-line managers are just happy to stick with the status quo and hopefully avoid new rounds of layoffs.