NCPA - National Center for Policy Analysis

Focus On Productivity For Higher Living Standards

January 16, 1996

Since 1870, productivity -- the output of goods and services the economy produces per hour of work -- has grown an average of 2.25 percent a year. But since 1973 it has slowed to an average rate of only 1 percent per year. This is a source of frustration not only for policy-makers and economists, but most notably for workers who have seen their living standards progress more slowly. Average wages and salaries have more or less stagnated since 1973, something they have not done over so long a period since the Civil War.
  • Had productivity grown at more than 2 percent over the last 20 years, the typical American family would have earned some $60,000 more during that period -- and better than $5,000 more during 1995 alone.
  • There would be no federal deficit at all at current levels of government spending, but rather a substantial surplus.
  • Taxes have thus become an increasing burden, and a significantly smaller percentage of Americans under 45 now own their own homes.

Economists cite many reasons for the slowdown. Among them are the increasing stranglehold of government regulations, as well as the decline in education in the U.S. and low rates of savings among Americans.

Source: Jeffrey Madrick, "Post-1973, the Era of Slow Growth," New York Times, January 16, 1996.


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