NCPA - National Center for Policy Analysis

Productivity Gains Expected To Continue

January 8, 2001

The White House and many of the nation's top economists agree that productivity growth -- which in recent years has been spurred by technology advances -- will continue in coming years.

But there is debate over just how technology has improved productivity; whether the gains have been confined to just technology manufacturers or have spilled over into other sectors; and whether they will endure in the wake of a steep downturn in the stock market and signs of a rapid economic slowdown.

  • Productivity growth has been about 1.6 percentage points higher during the past five years than in the period 1973-1995.
  • In its last formal economic report this week, the Clinton White House is expected to say there have been substantial productivity spillovers outside the technology sector -- and they will continue.
  • Robert Litan of the Brookings Institution and Alice Rivlin, a former Federal Reserve vice chairman, predict that Internet-related savings could range from $100 billion to $230 billion during the next five years -- the sectors seeing the greatest benefits being health care and the trucking industry.

Here are two examples of how innovative new technologies are helping particular industries raise productivity.

  • Computers could add $75 billion in value by routing trucks with fuller loads on more efficient routes.
  • Those engaged in retail trades can use computers to manage more efficiently their ordering, invoicing and supplies.

Source: Steve Liesman, "Productivity Gains Extend Beyond Technology Area," Wall Street Journal, January 8, 2001.

 

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