NCPA - National Center for Policy Analysis

U.S. Took Productivity Lead In 1990s

April 24, 2001

Productivity growth was higher in Europe than in the U.S. during the first half of the 1990s. Then the U.S. grabbed a dramatic lead in the second half, while Europe faltered.

According to a new Conference Board analysis:

  • In the first half of the '90s, European productivity on average grew three times as fast as that of the U.S.
  • But in the second half, U.S. growth more than tripled -- while European productivity growth fell by 50 percent.
  • Europe's surge in the first half may have been due to its substituting investment in labor-saving equipment to avoid as much as possible the Continent's rigid labor policies and high wages.
  • The U.S., on the other hand, was held back partly because we were in the process of installing new information technologies.

But in the second half, the U.S. began to reap the benefits of those new technologies -- while Europe's productivity began to slow sharply as relatively inexperienced workers found jobs as a result of efforts to tackle joblessness.

As to growth's payoff in higher living standards, between 1995 and 2000 relative per capita income here rose from 37 percent above that of Europe to 45 percent.

Those superior living standards are due not only to higher productivity rates, but also because Americans put in longer hours at work than Europeans, the researchers found.

Source: Gene Koretz, "Economic Trends: Productivity: Trading Places," Business Week, April 30, 2001; Robert H. McGuckin and Bart Van Ark, "Performance 2000: Productivity, Employment and Income in the World's Economies," Report 1287, March 2001, Conference Board.

 

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