While it is rather easy to forget once you remove the Uncompetitive Economy situation, Productivity is the single most influential factor when it comes to boosting GDP. You can roughly expect 3%p increase in GDP per Productivity rise of 10%p. Then, what will be the Productivity-deciding factors? There are Education, Health, Automation, Technology, and etc. but what interest me are Wages & Unemployment. Here’s their relations with each other:
- Higher Wages will lead to lower Productivity (up to -40%p)
- Higher Unemployment will lead to higher Productivity (up to effectively +30%p)
- Higher Unemployment will lead to lower Wages (up to effectively -40%p)
- Higher Productivity will lead to higher Unemployment (up to effectively +16%p)
This may sound like ‘higher Productivity has negative impacts on both Wages & Unemployment’, you shouldn’t forget the GDP. Higher Productivity will boost the GDP and thus create employment & boost Wages in the end. GDP-related links are written below.
- Higher Productivity will lead to higher GDP (up to +35%p)
- Higher GDP will lead to higher Wages (up to +30%p, heavily skewed)
- Higher GDP will lead to lower Unemployment (up to effectively -50%p)
Therefore, higher Productivity has both negative & positive impacts on Wages & Unemployment respectively, as written below.
- Higher Productivity → Higher Unemployment → Lower Wages
- Higher Productivity → Higher GDP → Lower Unemployment & Higher Wages
Simulation results suggest that higher Productivity will have minimal impact on Unemployment while actually boosting Wages. This sounds fair. But, there’s a thing - the GDP is capped at 100% and it’s quite easy to reach. It makes enormous differences to the simulation since the GDP will be constant however you boost the Productivity, nullifying some links as written below.
- Higher Productivity → Higher Unemployment → Lower Wages
- Higher Productivity →
Higher GDP → Lower Unemployment & Higher Wages
Yeah, higher Productivity starts to actually take jobs away. It would make sense since the output (GDP) is the same while efficiency (Productivity) has risen. It’s natural to assume that less input has been invested. Therefore, Productivity growth when the GDP is capped at 100% leads to results shown below.
Okay, enough of numbers and stats. Now, let’s talk about what all these sound like.
Capitalists and corporations start to realize that it is no more possible to increase the GDP. Nominal GDP can’t grow faster than inflation rates whatever they do. But they can still increase Productivity with some measures such as boosting Industrial Automation or revising the Labour Law (or etc). It won’t let them sell more products but it should be possible to reduce labor costs.
Workers are producing goods & services more than ever but they can’t demand higher pay since the corporations keep firing employees as they need less people to keep their output. The situation used to be better when the economy was in actual growth. It was criticized as “growth without more employment” but still better than now. Soaring unemployment is driving a lot of people into poverty or even crime. Who took all the fruits of higher Productivity? Communists say that it’s the capitalists while the nationalists say it’s the immigrants.
For me, this starts to sound like another Marxist revelation. Something that says “as organic composition of capital rises, people will lose jobs and be exploited even further” or similar.
Gameplay Implications
It is best to employ productivity measures as few as possible provided you can boost your economy without such, when you want to keep Wages high & Unemployment low. Or at least you should stop boosting productivity once you hit 100% GDP. It will do nothing but making the people poorer. You should be able to compensate the wage loss if you can trigger the High Productivity situation but it won’t compensate the unemployment rise.