The Productivity Problem

Abstract

Environmental protection and occupational safety probably play the major roles in decreasing productivity, for there is little evidence of rapid depletion. The decline in oil productivity is one reason why energy prices are up, and higher energy prices lead to lower utility productivity. Services are the mirror image of agriculture: agriculture was a rapidly declining low-productivity industry; services are a rapidly growing low-productivity industry. While agriculture enhanced productivity growth, services are dampening it. Particular problems in agriculture, construction, mining, utilities, and services explain about 57 percent of the productivity decline between the first and third economic periods. The amount of equipment per worker--the capital-labor ratio--is a key ingredient in productivity growth. Accelerating the growth of the capital-labor ratio would have required Americans to invest a much larger fraction of their gross national product (GNP) in plant and equipment. Investment problems go beyond those of simply raising the fraction of GNP devoted to plant and equipment investment.