What is the “normal” rate of productivity growth in the U.S.?
Any assessment of the post-1973 productivity slowdown should be guided by this saying: “expect too much and you are bound to be disappointed.” When productivity growth started to drop in the early ’70s, the nation had just come through an extraordinary productivity boom. In the 1950s productivity grew 2.0% per year. By the ’60s the growth rate was an amazing 2.5% per year (which is enough to double wages in 28 years). Against the record of the 1960s, the 0.6% average growth rate from 1974 to 1994 looks very disappointing. But a glance at Figure 1 will tell you that the growth slowdown in the 70s was no more abnormal than the growth-explosion of the 60s. The jagged blue line shows that downturns and upswings in labor productivity were common occurrences over the past 106 years. Most of these fluctuations are related to temporary events like wars and recessions. To get a sense of what a normal growth rate is, you have to examine the historical trend in productivity (see the red line on F
