The Growing Time Tax in the Digital Economy

Despite the rapid proliferation of AI chatbots and virtual assistants, finding the answer to a question that a company’s software isn’t programmed to answer can be frustrating. Sifting through endless options on comparison websites in search of the best insurance policy or airline ticket can be just as exhausting. Still, we tend to think of this “time tax” as a cost of doing business in today’s digitalized global economy. Sure, we already spend a lot of time online, both at work and in our free time. Internet users in the U.S. spend about eight hours a day online for activities like videoconferencing, shopping, or streaming shows and movies. But digital technologies are also eating up our waking hours in more subtle ways, allowing companies to offload tasks that were previously handled by their employees. Consider, for example, automated checkouts that let us scan and bag our groceries. This reduces the need for cashiers, allowing supermarket chains to save on payroll costs, increase revenue, and boost productivity. It could even save consumers some time by cutting down on waiting times. But it still means moving from paid work to unpaid work done by customers. Or consider filing your tax return. Many Americans now use software like TurboTax to file their annual taxes. While that can save consumers time and money by allowing them to avoid paying for an accountant or tax expert, it also means moving from paid professionals to self-service. These trends could be an early sign of the potential disruption of the labor market by large language models and machine learning. A 2023 study suggests that nearly 20% of U.S. workers, especially high-income earners, are susceptible to automation. But a comprehensive assessment of the costs and benefits of the AI ​​revolution must also consider its impact on what economists call the “household calculus”: our personal (unpaid) time and valuable but unmonetized household labor. What’s more, while AI can help companies cut costs and increase profit margins, those gains aren’t necessarily shared with consumers. For example, do stores that use automated checkouts charge lower prices or provide better service than their less automated counterparts? In fact, there seems to be little evidence that these technologies have actually benefited consumers. While the digital economy has provided us with valuable free services, it has also enabled companies to extract money from users by hiding prices and quality through overly complex designs, “dark patterns”—interfaces designed to manipulate users into making bad decisions—and potentially collusive algorithmic pricing models. But the real question is why digital innovations haven’t led to significant improvements in national productivity. The washing machine, as the late physician and statistician Hans Rosling famously argued, was one of humanity’s greatest innovations because it saved caregivers—the vast majority of whom were women—a huge amount of time and effort. So far, the digital revolution has not delivered a similar time-saving breakthrough. One possible explanation is that the care economy is hard to quantify. While it is widely known that demand for care workers is growing in OECD countries, economic statistics do not capture the amount of time spent on care work. The US Bureau of Economic Analysis and the UK Office of National Statistics occasionally publish data on household production, but policymakers and the media rarely pay attention to this data. Fortunately, researchers are working to fill this gap. For example, University of Kansas economist Misty Lee Heggeness is currently developing a “dashboard” of indicators of care work in the US. Similarly, the London-based Economic Statistics Centre of Excellence is investigating ways to analyze time-use data to measure household activity. As MIT economist Erik Brynjolfsson has argued, a new “GDP-B” indicator is needed to capture the benefits of free digital services such as online search and email. Similarly, we need a measure—call it “GDP-H”—that captures activity in the unpaid economy. The goal of such a metric would be to provide an accurate picture of economic activity. We currently miss much of the value that technology creates or destroys, simply because it is not monetized. While measuring the frictions created by today’s digital technologies remains difficult, they are increasingly occupying a large part of our daily lives. With AI-driven automation on the horizon, it is crucial to ensure that technological advances simplify life, not complicate it, and that the benefits are available to all. To achieve this, the AI ​​industry must create more value than it destroys. While major new technologies are always groundbreaking, their social acceptance depends on their ability to improve people’s lives in significant ways. – Project Syndicate