Productivity growth is an old concept; we’ve been seeing it at a substantial pace for more than 200 years. Nonetheless, many elite intellectual types like to claim they know nothing about it when they talk about AI.

It’s far from clear how much of a productivity boom we will see with AI. For people who are lost with my reference to productivity growth, the story that AI will take all the jobs is a story of a massive productivity boom. If that happens, it will mean that the people who are still working will be hugely more productive, since we will be producing the same or more goods and services as we do at present, with many fewer people working.

FWIW, virtually no major forecaster or forecasting agency is projecting anything like this productivity boom. For example, the Congressional Budget Office (CBO) projects that productivity growth will average 1.5 percent over the next decade.

That’s a healthy rate of productivity growth, but nothing extraordinary. It’s a bit better than the 1.3 percent rate from 2005 to 2025, but less than the 2.0 percent rate we saw in the 1990s and much less than the 2.4 percent pace the country had from 1947 to 1973. There is no story of AI creating mass unemployment here.

CBO is not God, but they are pretty much in the center of professional forecasters by design. They try to make sure that their forecasts do not vary hugely from what other public and private sector forecasters are projecting.

It is also worth noting that if CBO is seriously wrong on the low side, then some other things logically follow. Most importantly, if productivity growth proves to be far more rapid than what they have projected, GDP growth will also be far more rapid than projected. This would mean, among other things, that the debt-to-GDP ratios will be much lower in the future than is currently projected.

In other words, the people yelling about unsustainable debts and deficits need to STFU. You can’t both be expecting a massive AI productivity boom and think the US has a huge debt problem. That is not a matter of opinion; it is a matter of logic.

But let’s assume for a moment that we do get a huge productivity boom from AI. We don’t need to run around like chickens with our heads cut off when we ask what to do about it. Because productivity growth is in fact a very very old phenomenon. We have long known how to deal with it; we shorten work hours.

Workers in Germany, France, and other wealthy countries work on average 20-25 percent fewer hours a year than Americans.

That is why we got the 40-hour work week with the Fair Labor Standards Act (FLSA) in 1937. The Act doesn’t actually prohibit employers from having longer work weeks; it simply requires them to pay a 50 percent premium for overtime hours. This was supposed to encourage them to hire more workers instead of working their existing workforce more hours. (Contrary to the way it is discussed in the media, the decision to put in overtime is almost always the employer’s, not the worker’s. Unless a union contract specifies otherwise, an employer has the option to fire a worker who refuses overtime.)

This is why it was truly incredible that Trump eliminated the income tax on the overtime premium. This is effectively encouraging employers to have longer workweeks, 180 degrees opposite of the intention of the FLSA.

But just because Donald Trump and Republicans in Congress have no grasp of economics doesn’t mean the rest of us shouldn’t. If we........

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