Digital Technologies and the Global Economy's Productivity Imperative

Global GDP growth has been propelled by two key factors over the past 50 years: growth of the size of the overall labor force, which doubled in the G20 countries as a result of brisk population growth, and rising productivity. Over the next half century, from 2014-2064, as a result of declining fertility rates, the working-age population is expected to fall in all G20 countries, and is already doing so in Germany, Italy, Japan and Russia. Given this demographic trend, the onus for future growth will be on productivity, whose growth in developed economies has been declining over the past decade. For the world to maintain the same GDP growth trajectory over the next half century, productivity would need to grow 80% faster than the already high rate of the past 50 years. This paper examines the extent to which digital technologies could help respond to this productivity imperative. In contrast to some observers, we do not expect a drying up of technological or business innovations to constrain growth; we also believe that technology-driven productivity is compatible with rising employment. Drawing on research by the McKinsey Global Institute (MGI) and McKinsey & Co.'s Operations and Hi Tech Practices, we outline the potential for digital technologies and business innovation to raise productivity and increase employment. We conclude with a discussion of the priorities for governments and policy makers as they seek to make use of the opportunities technology is creating