BPEA | 1988 No. 2

The Productivity Slowdown, Measurement Issues, and the Explosion of Computer Power

Martin Neil Baily and Robert J. Gordon
Robert Gordon Headshot
Robert J. Gordon Stanley G. Harris Professor of the Social Sciences - Northwestern University

1988, No. 2

ALMOST TWO DECADES have now passed since U.S. productivity growth first showed signs of slowing, more than 15 years since the first paper on that topic appeared in this journal. Overall, the slowdown continues with little relief; in the nonfarm business sector the annual growth rate for both output per hour and multifactor productivity was more than 1.5 percentage points slower during 1973-87 than during 1948-73.2 If the productivity slowdown continues, it must inevitably reduce the ability of the United States to increase its per capita income and wealth, just as it has already resulted in a near-total cessation in the growth of economywide real hourly compensation since 1973.3 In this sense the productivity growth slowdown might be described as America’s greatest economic problem.