The Productivity Growth Slowdown: Diverging Trends in the Manufacturing and Service Sectors
1997; Taylor & Francis; Volume: 82; Issue: 1 Linguagem: Inglês
ISSN
1532-4168
Autores Tópico(s)Economic Theory and Policy
ResumoContinuing gains in labor productivity are essential to keep real wages and the U.S. standard of living from stagnating. After a period of strong gains in the 1960s, the average growth rate of productivity slowed substantially in the early 1970s. In the following years, productivity continued to grow slowly despite rapid technological advances in such areas as computers and digital communications. Analysts have proposed differing explanations for the productivity slowdown and for the failure of productivity growth to rebound in recent years. Most explanations focus on aggregate factors, such as overall saving and investment rates or the quality of the labor force. This article approaches the productivity growth slowdown from a different perspective. In particular, it decomposes the slowdown into contributions by broad sectors of the economy, focusing on the two largest sectors-manufacturing and services. Doing this reveals that the main factor accounting for the productivity slowdown has been stagnating productivity in the service sector. An accompanying and reinforcing factor has been the strong employment growth in services relative to manufacturing. The first section of the article documents the key sectoral shifts in productivity growth and employment shares since 1960. The second section identifies underlying factors that may explain these key sectoral shifts. The third section explores the outlook for sectoral productivity and employment shares to assess the prospects for a rebound in productivity growth. I. THE DECLINE: A SECTORAL EXPLANATION Sectoral explanations of the productivity slowdown complement the more familiar aggregate explanations rather than competing with them. Broad factors, such as saving and investment rates, help determine aggregate productivity and output and implicitly underlie the sectoral developments discussed in this article. But an explicit sectoral analysis provides a different perspective on the productivity slowdown, highlighting some important factors that often are lost in aggregate analysis. This section documents the decline in aggregate productivity growth and shows how shifts in relative sector sizes and productivity growth rates contributed to the decline. The aggregate productivity slowdown The trend growth rate of U.S. aggregate productivity slowed in the early 1970s. Chart I shows actual productivity and an estimate of trend productivity for the private, or nongovernment, sector since 1960. The government sector was excluded because of measurement difficulties encountered by the Bureau of Economic Analysis (BEA) and the Bureau of Labor Statistics (BLS) when constructing real government output and productivity estimates.' The slope of the trend productivity line represents an estimate of the trend growth rate of private productivity. Since 1972, when the trend growth rate is estimated to have fallen, private productivity growth has averaged only 1.3 percent per year (Filardo). This rate is down substantially from the 3.4 percent productivity growth rate recorded from 1960 until 1972. Why has the estimated trend growth rate fallen 2.1 percentage points since 1972? Moreover, can productivity growth rebound in the future? To answer these questions, it is useful to examine the behavior of sectoral factors that contribute to aggregate productivity growth. Aggregate productivity growth roughly equals a weighted average of sector productivity growth rates. The weight on a given sector's productivity growth rate reflects the sector's employment share, or the fraction of the nation's work force employed in that sector.2 Thus, shifts in relative size and productivity growth rates of the various sectors should explain the 1972 productivity slowdown. Sectoral shifts in services and manufacturing Because manufacturing and services account for such a large share of private employment, most of the productivity slowdown can be explained by focusing on these two sectors. …
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