Americans aren’t upgrading their phones as often — and surprisingly, it’s hurting the economy

Smartphones loaded with new features keep flooding the market every year, but Americans are more reluctant than ever to give up their old devices, according to a recent survey by Reviews.org. According to the survey, an average consumer is holding onto a smartphone for 29 months, which is higher than the 22-month average in 2016. While hoarding old phones may save money for consumers in the short run, CNBC suggests that it isn't healthy for the economy amid fears of a weak market.

Jason Kornweiss, senior vice president of advisory services at Diversified, a global technology solutions provider, told the publication that while people still want to upgrade to the latest phones and devices, research shows a widening gap between businesses and individuals when it comes to old devices. A recent report from the Federal Reserve revealed that every year corporations delay upgrading their equipment, it leads to a drop in productivity by about one-third of a percent. Another workplace research conducted by Diversified last year discovered that 24% of employees work overtime or work late due to old technology, and a whopping 88% of employees report that inadequate technology stifles innovation at the workplace.

“Corporations with hundreds or thousands of people are not investing at the same rate,” Kornweiss told CNBC. He explained that the technology is changing so fast that the IT departments in corporations can't keep up with the pace. Big corporations need time to vet the new technology, and by the time they are done, something new is already in the market. “Businesses establish a shelf-life that is multi-year. Employees look at replacing devices within an organization as too tedious, and people cringe when the IT department comes with a new device,” Kornweiss said. Thus, he added that the price that organizations pay is the lack of productivity.

While experts agree that old devices cause productivity drop and inefficiency, Steven Athwal, CEO of the U.K.-based refurbished device store, The Big Phone Store, told CNBC that device longevity isn't the problem. “The issue is the lag. Businesses and individuals are trying to squeeze modern workloads out of old hardware, heavy processing, rendering, generation, and admin, and that creates a productivity drag. Things like slow processors, outdated software, and degraded batteries on older tech waste energy and morale,” Athwal said. He added that when people hold on to their devices for longer, the repair and refurbishment market gains, but since it is mostly "unreported, unregulated, and underutilized," the work happens in the shadows. "If governments and big tech supported refurbishment properly, aging devices could become part of a sustainable circular economy,” he added. 

On the other hand, the data shows that businesses in the U.S. are generally quicker to upgrade their equipment as compared to their European counterparts. The Fed's report shows that if European productivity had matched U.S. investment patterns starting in 2000, the productivity gap between the U.K. and the U.S. would have reduced by 29% and the same would have been 35% for France, and 101% for Germany.

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