First, increased innovation associated with the spurt of new businesses since the onset of the pandemic may raise productivity. Second, current labor shortages are spurring increased investment in automation that should boost labor productivity over time.
Finally, a recent paper by David Autor, Arin Dube, and Annie McGrew suggests another way that the strong labor market could boost productivity.3 They find that faster wage gains for lower-paid workers have come from job-switching to higher-wage firms, which may also be more-productive firms. Currently, however, supply in the economy continues to be insufficient to meet stillrobust demand.