Why has the transfer of so many tasks previously done by businesses not produced productivity gains, Rhys David asks.
Growth is the chimaera that governments of all persuasions seek to achieve, nowhere more than in Britain, languishing behind other more dynamic economies such as the US for most of this century. It has been promised by recent Conservative governments and by Sir Keir Starmer and his Chancellor Rachel Reeves since day one of Labour’s return to office in 2024. Andy Burnham, Sir Keir’s successor will offer the same.
Economists need, however, to explain an enigma. Why have the enormous changes in the way society is expected to interact with public and private sector organisations, usually obliging the user to assume tasks previously undertaken on their behalf, not resulted in huge productivity gains, and hence economic growth? Organisations of all sorts over the past three decades have managed to transfer to their clients, users, and consumers tasks which they were previously required to conduct in-house, so where are the savings that should have flowed through?
It all perhaps started when automatic gates started to replace car park attendants, enabling them to be run virtually without staff. Further technological developments have resulted in the operators, some of which are part of large overseas corporations, not even having to send employees to collect money from machines as payments are exclusively online. Similarly, tickets on the London Underground and at railway stations are now for the most part sold from machines and automatically checked at gates that control (up to a point) entry and exit. Paying a gas or electricity bill, a road toll, or a parking charge, depositing a cheque, booking a restaurant meal, a theatre ticket, hotel room or holiday, or even checking into a flight and depositing baggage, are routinely being processed instead by the purchaser or user, using his or her phone or laptop. Family furniture, of course, has to be built by the consumer since the revolution brought about by Sweden’s Ikea, and new domestic audiovisual and IT equipment requires the purchaser to be able to confidently work through internet instructions for installation. The tedious business – for manufacturers – of producing guide books, manuals and other leaflets has also been obviated by the introduction of online materials.
Dealing with the public sector is no different. Prescriptions are ordered online from your medical practice, as are blood tests, injections and increasingly doctors’ appointments. Worried about your blood pressure? Buy or borrow a machine and test it yourself and if it is too high, you can direct the result to the pharmacist who will decide if a doctor’s appointment should be booked, probably over the phone. It is now almost impossible to speak to a human at HM Revenue and Customs to discuss your tax return which has to be filed online, so the onus is on you not to make any mistakes or face a fine. Council tax, and a myriad inquiries you might have of your council are all also now expected to be conducted by clicking on successive links taking you through multiple options on multipage websites.
Likewise, in retailing most supermarket tills now stand deserted with perhaps just one or at most two being staffed. Instead, customers now queue sheepishly to swipe their purchases, bag them and pay, patiently following the commands and instructions offered by banks of automated tills, calling over a solitary member of staff to sort out the inevitable problems when the automatic scales in the “bagging area” are confused or a coupon has not registered in the designated slot.
Admittedly, there are advantages for the public if they can navigate these systems. The public can carry out transactions from their desks or armchairs without the need to travel to the provider’s office or business or spend time telephoning. They will make savings on transport and in time spent and can themselves use the time for other activities.
Many people, however, will find it difficult to manage these transactions or have queries that really do need to be dealt with face-to-face. They will often not find what they want in FAQs, the annoyingly named Frequently Asked Questions, where the suggestions offered tend to be couched in general terms or direct you back to a previously visited page. Many people would probably wish a genuine choice between automated and personal was offered.
This virtual withdrawal of public and private sectors from providing a public interface should have resulted in very large savings to the organisations providing those services or purchases. Automated systems have made it possible for businesses and the public sector not only to reduce staff counts and wage bills, but to close buildings where transactions used to take place. Post Offices and bank branches, with their associated rental, maintenance and utility costs can be reserved for only bigger centres.
The almost universal adoption of email in place of physical mail represents a further cost saving. Constant nudging has persuaded the consumer that bank statements, council tax demands, utility bills, television and other licences, permits and passes are best sent to the Inbox rather than drop through the letterbox so there should have been a significant reduction in paper and printing costs, in mail room staff, and in reduced vehicle miles and fuel consumption from collecting and delivering mail.
Why then has the age of do-it-yourself not delivered productivity gains? And will the much-vaunted AI have a similarly depressing effect, for the public at any rate, moving the consumer into carrying out yet more tasks for the benefit of businesses providing goods and services?
One economist to whom I have put the problem agrees it is a puzzle but suggests job transference is at work. The introduction of ATMs (Automated Teller Machines), did not, he points out, lead to a drop in bank employees, but in fact the opposite. Other activities were found for them to do. At the start of the 2000s banks were stripping out rows of counters, placing a handful at the back of the branch, and replacing them in the entrance to branches with cash dispensers and booths for often young poorly-trained “advisers”. Many of the products being sold in this new world of banking did not turn out to be quite as good as they might have been. Mis-sold mortgage protection policies and car finance, which have cost the financial institutions dearly, come to mind. The steady decline in the number of bank branches has also seen many of these new jobs disappear only a few years after they were created.
Many of the new posts created elsewhere as a result of technology would seem to offer lower job satisfaction than those they have replaced. Swiping goods at a supermarket check-out must have a high boredom factor but at least there is the opportunity for the occasional conversation with customers. Standing next to a bank of automated tills and using the staff card on a lanyard to authorise purchases when the machines have raised one objection or another must beat the most routine factory job for boredom.
The same must be true of transport employees who stand next to gates allowing passengers through when passage is barred. A rail ticket checker standing at the entrance or exit to the system occupies a position of some authority even if only a modest one. As in supermarkets the new jobs are mechanical – opening the gates when a ticket or QR code fails to do the job. Automation has therefore put purchasers and service users to work for the benefit of the providers but resulted in many of the replacement jobs being less skilled and hence less bearable.
Other jobs that have been “created” through the internet can be dismal: supermarket order fulfillers working through the night to pick the chosen brand of shampoo or cereal for your home delivery order; scooter and motorcycle drivers bringing your lunch, dinner or even breakfast. Unsurprisingly, the businesses involved have found it extremely difficult to find individuals in the UK who are willing to accept these roles despite high levels of youth unemployment.
Yet this has not always been the case in times where earlier transformational changes have occurred. The introduction of electricity, the development of the railways and the invention of the internal combustion engine all produced surges in new jobs and productivity enabling leaders in these technologies and especially Britain, Germany and the US to acquire wealth rapidly and move far ahead of countries unprepared to participate in these new technologies.
So, why has this more recent transfer not worked in the same way? What happened to the productivity bounce expected from digitisation? Where is the dividend? Why are companies not making the most in growth from the wholesale transfer of activities back to the consumer? In theory this should have allowed resources previously used in these situations to be redeployed elsewhere to more productive uses, raising the country’s output and productivity.
There would seem to be a valuable research project aimed at answering some of these questions. Has too great a proportion of the savings that should have fed back into output and productivity gains – in the form of investment, for example in new manufacturing and other technologies, in equipment and infrastructure – gone to shareholder dividends and into directors’ remuneration? Perhaps more cynically it might be asked could individuals at work, if they have the opportunity, find themselves having to carry out some of these bill-paying, grocery shopping, theatre booking and other activities during their working day, reducing output per hour and thus not boosting the organisation’s productivity?
Has this effect been amplified by Working From Home? Could the low-quality nature of many of the jobs created as a result of the replacement of humans with technology become a central driver of high levels of immigration? Previously happy with jobs offering at least a degree of satisfaction and hopeful of progressing to other more senior posts over time, are Britain’s young people, and in particular those with weak qualifications – where the crisis in non-participation in the workforce is at its greatest – simply showing they are reluctant to take up the poor quality starting-post employment now on offer?
The next revolution – AI – has already started. Will it prove just as inconsequential in raising productivity as digitisation, merely resulting in further transfers of tasks (and income) further emphasising the gulf between rich and poor individuals, and between technologically advanced and backward countries? Or could it under a different scenario even do for the professions what digitisation has done for many other service jobs, making it difficult for law, accountancy, finance, and other specialist disciplines to maintain their priest-like caste status? Commentators’ views vary widely, with some seeing the virtual end of work and others suspecting a bubble that will burst with consequences not dissimilar to that of the dotcom bubble in the early 2000s.
Answers, please.
Rhys David July 3rd, 2026
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