martes, 19 de mayo de 2015

martes, mayo 19, 2015
Commentary

The Mystery of Declining Productivity Growth

The healthy 2.6% a year from 1995-2010 has since been an anemic 0.4%. What’s scary is that we don’t know why.

By Alan S. Blinder

May 14, 2015 7:10 p.m. ET

         Photo: Getty Images


Are you worrying about America’s recent dismal productivity performance? You should be.

Productivity gains are the wellspring of higher living standards, and the well has been running pretty dry lately.

How dry and how lately? I prefer to date the slowdown in productivity growth from the end of 2010 because productivity growth (in the nonfarm business sector) averaged a bountiful 2.6% per annum from mid-1995 through the end of 2010, but only a paltry 0.4% since. Other scholars prefer earlier break points. For example, productivity growth averaged 2.9% from mid-1995 through the end of 2005, but only 1.3% since.

Either way, the drop is large, and the scary thing is that we don’t understand why.

One cheerful hypothesis is that the problem is a statistical illusion. By definition, labor productivity growth is the growth of measured output minus the growth of labor input. So if we undercount output growth, we automatically understate productivity growth. One notable aspect of modern life is the wide array of online services people now get for free. Because they are free, they add nothing to measured output growth, which seems like a measurement error.

But what are they “really” worth?

To account for a 1.6 percentage-point decline in the productivity growth rate for 10 years, all those new apps, social media and free services would now have to be worth almost $2.5 trillion more per year than in 2005. That’s not believable.

A second hypothesis sees the dismal productivity performance after 2010 as payback for the marvelous performance of 2009 and 2010, when productivity soared while the economy was weak.

American businesses shed workers so fast that annual productivity growth topped 3% for two years. Then, as the economy improved, firms had to catch up by hiring many more workers, and hours of work rose rapidly. This sort of catch-up seemed a plausible explanation in 2011 and 2012. But productivity growth still has not returned to a normal rate of 2% or more.

A third hypothesis, weak investment, is more promising. The basic idea is straightforward: If the capital stock grows more slowly, as it has in recent years, workers will have less new capital to work with, and their productivity will therefore improve more slowly.

But when it comes to making that intuitive idea numerical, the time period matters a lot. I’ll spare you the calculations, but the necessary data, which end in 2013, show that weak investment can account for about 70% of the sharp slowdown after 2010. But three years is too short a time period to draw any conclusions. If we date the productivity slowdown from 2005, weak investment accounts for only about 25% of the slowdown.

Here are two less conventional, even counterintuitive, hypotheses.

First, a series of papers co-authored by John Haltiwanger of the University of Maryland has documented a surprising fact: American businesses are churning and reallocating labor less than they used to. That’s good, you say: Reduced labor market volatility makes life less onerous for workers. Yes, but Mr. Haltiwanger and his colleagues point to a downside: Less churning may connote less entrepreneurial dynamism, which could slow down productivity improvements.

“Wait,” you might say. “One trip to Silicon Valley will disabuse you of this notion. Industrial dynamism is in the air.” Maybe so. But Silicon Valley is just one corner of the economy. The Haltiwanger studies test their hypothesis with national data and find evidence that declining dynamism started in the 1980s, but spread into high-tech industries, and perhaps accelerated, in the 2000s.

Second, consider the possibility that technological progress has actually slowed in recent years, despite all the whiz-bang stories you read in the business press.

Impossible? Well, keep in mind that to an economist “technological progress” means getting more output from the same inputs of capital and labor. Does Twitter TWTR 0.11 % do that?

Or Snapchat? Some popular online services might even reduce productivity by turning formerly productive work hours into disguised leisure or wasted time.

In somewhat different ways, John Fernald of the Federal Reserve Bank of San Francisco and Robert Gordon of Northwestern University, two leading productivity experts, have argued that the greatest productivity gains from information technology came years ago, and that recent inventions look puny by comparison. Compare Facebook FB -1.09 % with the Internet, or the Apple Watch with the personal computer. Maybe inventiveness has not waned, but the productivity-enhancing impacts of inventions have.

So what do we conclude? Low investment during and after the recession likely played some role in slowing productivity growth. Under-measurement of output probably contributed a bit too—and maybe also over-measurement of hours of work, as more office time was gobbled up by Facebook, Twitter and the like. Perhaps American industry lost some of its previous dynamism and entrepreneurship.

But the big question mark is technological improvement. Has it really slowed down? Or are we simply waiting for the productivity fruits of the latest inventions? Tune in 20 years from now to find out. In the meantime, worry.


Mr. Blinder, a professor of economics and public affairs at Princeton University and former vice chairman of the Federal Reserve, is the author of “After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead” (Penguin, 2013).

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