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BPEA Article

Productivity and Profits in the 1980s: Are They Really Improving?

Abstract

OVER THE LAST TWO DECADES the U.S. economy has experienced a dramatic deterioration in both productivity and profit performance. After averaging more than 2.5 percent per year in the 1950s and early 1960s, labor productivity growth in the nonfarm sector slowed to about 2 percent per year between 1965 and 1973, and then plummeted to less than 1 percent per year between 1973 and 1980. At about the same time, the return on capital also sagged: after averaging 16 to 17 percent of output in the 1950s and early 1960s, net capital income (before-tax economic profits plus net interest paid) of nonfinancial corporations dropped to 13 to 14 percent of output by the mid-1970s.

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