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Is the U.S. facing a productivity crisis?

February 16, 2011

Mercedes2.jpgGenerations of Americans have clocked in to work each morning confident that their daily toils would afford them a better standard of living than their parents. But that central promise of the American dream may now be under threat.

According to a productivity and competitiveness report from the consulting firm McKinsey & Co., the U.S. economy requires dramatic productivity gains to ensure that future workers will benefit from economic growth. How to achieve these gains will be the focus of a discussion between Reuters global editor-at-large Chrystia Freeland and McKinsey’s global managing director Dominic Barton for a Thomson Reuters Newsmaker event on March 1, “Thriving in the New Global Economy.”

The McKinsey report says past GDP growth was driven primarily by adding workers to the U.S. labor force. But as baby boomers retire and the number of working women peaks, these sources of labor are starting to dry up.

Without that increased labor input, McKinsey says productivity must rise by at least 30% to sustain past GDP growth rates. The consequences of inaction are stark: Americans born in 1960 saw their per capita GDP grow 2.5 times by the age of 40; Americans born in 2000 are forecast to see an increase of 1.6 times.

McKinsey identifies a handful of key areas where the U.S. economy can tackle the looming productivity challenge. They include training workers for high-demand sectors like science, healthcare and engineering, building modern infrastructure and increasing investment in research and development, which has typically been a strong suit of America.

FINANCIAL/GRADUATESBut Economic Outlook Group chief economist Bernard Baumohl believes that focusing solely on productivity fails to address the most pressing problem facing the U.S. economy: how to deal with the glut of long-term, unemployed workers.

He says the U.S. actually has already made impressive productivity gains and that there is no country on earth that displays a similar level of innovation in consumer goods and business technology.

“We have got lots of other issues we need to face in this economy,” Baumohl says. “Most of all, is how to get 50 million people back into the workforce.”

Photos; Top: David Dennis works on the installation of a new robot, which will help to increase productivity of the Mercedes-Benz M-Class All Activity Vehichle, July 1 at the M-Class plant in Tuscaloosa, Alabama. REUTERS/HO, Bottom: Old Graduates of Columbia University on May 18, 2005. REUTERS/Chip East.

Comments

Lower corporate tax to Singapore equivalent rate, 12 to 15% max and u will see foreign corporations invest in manufacturing in the US lifting demand for workers. Make outsourcing outside the US non tax deductible, will bring back a lot of work and quit teaching other countries how to do business and paying them to learn it.

Posted by robb1 | Report as abusive
 

The article is about productivity not about jobs. I heard last week that Ireland and Norway recently passed the US in worker’s productivity. At the same time as this was happening both of those countries passed the US in per capita college graduates.

Posted by frank654 | Report as abusive
 

Great comment about corporate tax rates. Japan is lowering it’s corporate tax rate this year, and then the US (at 35%)will be the worlds highest.
If they would made it easier and cheaper to hire workers….
If we could drill for oil in this country…..
If we could REFINE oil in this country so that one hurricane doesn’t knock off the whole US production….
Just obama’s edict stopping oil drilling (that was overturned at least TWICE) cost thousands and thousands of jobs, a lot of which are not coming back. Even though permits had already been granted after YEARS of delays by environmentalists, he stopped the permits. Those oil rigs that left ARE NOT COMING BACK anytime soon.
If obama (who ran as a conservative) would slash government spending so that the world wouldn’t worry if we can pay they money that we’ve borrowed……
The good thing is that we can reverse a lot of the bottlenecks that hinder growth in the US, and the bad news is that obama will put up MORE ROADBLOCKS (while talking out the ‘other side of his mouth’)and the US economy is not going to turn around until there is another election, and we get some fiscal conservatism.

Posted by GaveUpOnTV | Report as abusive
 

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