NCPA - National Center for Policy Analysis

The Productivity Phenomenon

February 9, 2000

The Labor Department reports that American workers' productivity soared in the second half of 1999 -- contributing to the highest annual gain in seven years. Increasing productivity allows employers to raise wages without raising prices, thereby holding inflation in check.

  • Productivity among non-farm businesses rose 5 percent in the October-December quarter -- with revised figures for the third quarter indicating an identical gain.
  • For all of 1999, productivity rose 2.9 percent -- the fastest growth since the economy was recovering from a mild recession in 1992.
  • Economists credit companies' increasing ability to use computers and the Internet to conduct business more efficiently.
  • The productivity gains helped hold labor cost increases to just 1.8 percent in 1999 -- lower than the 2.4 percent increase in the previous year.

Economists point out that such productivity growth is unusual this late in an expansion. Moreover, the figures hint that the surge in business and worker efficiency -- a key ingredient in today's low-inflation economic boom -- shows no signs of slowing down.

Source: George Hager, "Worker Output Shoots Higher," USA Today, February 9, 2000.


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