ECONOMIC REPORT OF THE PRESIDENT

Box 2-8: Productivity Among the Advanced
Economies—Explanations and Prospects
The slow productivity growth over the last decade in the United
States is hardly an exception within the advanced economies. While
there is still substantial heterogeneity across the advanced economies
in terms of their cyclical position, there is commonality in terms of
their experience with productivity growth. Average annual productivity
growth in the advanced economies slowed to 1 percent in the period
from 2005 to 2015, down from 2 percent in the previous decade—with
productivity slowing in 34 of the 35 OECD member countries, including
all of the G-7 economies, with the United States having the fastest
productivity growth in the G-7 (Figure 2-xvi).
An economy takes various inputs, such as labor and capital, and
produces goods and services. Low labor productivity growth means that
labor inputs are growing relatively quickly compared with output, such
that growth in output per hour worked is low. This may be due to less
capital for each worker or because technology or management are not
using these inputs efficiently.
It is unlikely to be a mere coincidence that a substantial shortfall
in aggregate demand and a large slowdown in productivity growth have
occurred simultaneously. In fact, the causal relationship between the
two phenomena likely runs both ways. In the period from 2008 to 2014,
Figure 2-xvi
Labor Productivity Growth Slowdown in the G-7
Percent Change in Labor Productivity, Annual Rate
2.8
1995-2005 2005-2015
2.4
2.0
1.6
1.2
0.8
0.4
0.0
-0.4
Canada France Germany Italy Japan United
Kingdom
Source: The Conference Board, Total Economy Database; CEA calculations.
United
States
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