Diane Coyle | The Growing “Time Tax” in the Digital Economy

Despite the rapid proliferation of AI-powered chatbots and virtual assistants, it can be frustrating to find the answer to a question that a company’s software can’t answer.

Searching through endless options on price comparison websites to find the best insurance policy or airline ticket can be just as exhausting. Yet we tend to view this “time tax” as a cost of doing business in today’s digitalized global economy.

We already spend a lot of time online, for work and leisure. Internet users in the United States spend about eight hours a day online, doing things like videoconferencing, shopping, or watching shows and movies on streaming services. 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 allow us to scan and bag our groceries. This reduces the need for cashiers, allowing supermarket chains to save on payroll costs, increase revenues, and increase productivity. It may even save consumers some time by shortening lines. But it still means moving from paid work to unpaid work performed by customers.

Or consider filing your taxes. Many Americans now use software like TurboTax to file their annual taxes. While this can save consumers time and money by allowing them to avoid paying for an accountant or tax expert, it also means moving away from paid professionals and toward self-service.

These trends could be an early sign of the potential disruption of the labor market from large language models and machine learning. A 2023 study suggests that nearly 20 percent of U.S. workers, especially high-income workers, 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 passed on to 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 actually benefit 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 have not led to significant improvements in household 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 them women—a huge amount of time and effort. So far, the digital revolution has not brought a similar breakthrough in time-saving.

One possible explanation is that the care economy is difficult to quantify. While it is widely known that demand for care workers is growing in OECD countries, economic statistics do not take into account the amount of time spent on care work. The US Bureau of Economic Analysis and the UK Office for National Statistics publish household production data from time to time, but policymakers and the media rarely pay attention to the data.

Fortunately, researchers are working to bridge the gap. For example, University of Kansas economist Misty Lee Heggeness is currently developing a “dashboard” of care work in the United States. Similarly, London’s Economic Statistics Center of Excellence is exploring ways to analyze time-use data to measure household activity.

As MIT economist Erik Brynjolfsson has argued, a new “GDP-B” measure is needed to capture the benefits of free digital services like 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 measure 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 friction created by today’s digital technologies remains a challenge, they are becoming an increasingly 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.

Diane Coyle, professor of public policy at the University of Cambridge, is the author of Cogs and Monsters: What Economics Is, and What It Should Be. © Project Syndicate 2024 www.project-syndicate.org