What If Underpaid Workers Are Holding Back Innovation

I was reading the Malcolm Gladwell take on the Jobs biography and came across this little gem --

One of the great puzzles of the industrial revolution is why it began in England. Why not France, or Germany? Many reasons have been offered. Britain had plentiful supplies of coal, for instance. It had a good patent system in place. It had relatively high labor costs, which encouraged the search for labor-saving innovations. In an article published earlier this year, however, the economists Ralf Meisenzahl and Joel Mokyr focus on a different explanation: the role of Britain’s human-capital advantage—in particular, on a group they call “tweakers.” They believe that Britain dominated the industrial revolution because it had a far larger population of skilled engineers and artisans than its competitors: resourceful and creative men who took the signature inventions of the industrial age and tweaked them—refined and perfected them, and made them work.

Did you catch that bit in the middle (highlights/bold are mine). I was suddenly reminded of a bajillion graphs I've seen recently, including but not limited, to this one:

What if the problem with current innovation is that there's a "release valve" for it? That is to say, because workers are paid so little (in the US and elsewhere), there's not a pressure to reduce the number of them, so innovation is depressed?

I'm not looking to drive people out of work, but when labor costs are high, there's an inherent desire to make your processes more efficient so you can cut those costs. But the other half of that is that it takes far less capital to get your new businesses going, which means more people can do cool things.

1 response
[I have no data to backup my claims, just anecdotes; of course, that's par for the course for blog responses, right?]

What strikes me as interesting as of late is that the hunger for new features, particularly in the digital space, seems to be outweighing any concept of cost-savings. So I would guess that companies, either consciously or subconsciously, are deciding to ship more new features than to cut costs. Also, I am not sure that the software industry is all that good at it across the board.

For example, customer support was outsourced to India, right? But of course, that became a problem because businesses underestimated how important it is that customer support be, you know, supportive, and not just churning through callers. So companies are bringing customer support back to the States.

What's also interesting is whether "cool things" can only develop when there is inertia in that direction, or at the least, not enough inertia to keep someone from breaking out. It seems to me that there are a lot of cool things being done by small companies (I'm thinking of taskrabbit.com or hark.com :) right now, for some reason), and I wonder if it is because there is no institutional inertia holding them back.