Is the U.S. facing a productivity crisis?
Generations 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.
But 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.