Factors Influencing Changes in Productivity

Abstract

Productivity measures the use of economic resources and is, therefore, a major index of economic welfare for individuals and the nation. The rate of productivity growth over the long run determines economic growth and makes possible improvements in living conditions and the attainment of national objectives. A slow growth economy will have difficulty reconciling society’s desire for general economic progress and resolving domestic and international problems; slow growth will therefore cause internal political and social problems, because improvements for some groups must come at the expense of losses for others. The decomposition of society into competing groups attempting to improve their relative positions when the nation as a whole loses (as with OPEC price increases), can escalate inflationary pressures, further shrinking national wealth. Thus, our national prestige, competitiveness, security, and welfare depend heavily on the level and growth of productivity.

I gratefully acknowledge Jerry Mark and his colleagues at the Bureau of I-abor Statistics and Nancy Barrett and Peggy Connerton of the Office of the Assistant Secretary for Policy, Evaluation and Research lor their help with this paper.