The OECD’s newly released findings from its productivity database focuses its attention on the “productivity paradox” (mentioned in the Record’s previous post). Much is being debated around why productivity growth has been slowing down despite “significant technological change, increasing participation of firms and countries in global value chains and rising education levels in the labor force”. The concern is that the slowdown may not just be due to a transition from old sectors to new sectors, but may indeed be permanent (or, structural). If so, the world can expect that slow growth and stagnant incomes may be here to stay. The debate has two sides, of course. Future posts will discuss these ideas more.
Right now, the OECD reminds us that the slowdown in productivity growth is not a new phenomenon occurring over the last few years, but began well before the crisis. Productivity growth began trending down since the early 2000s in Canada, the UK and the US, and since the 1970s in France, Germany, Italy and Japan.
Explanations include lower investment in capital, lower contribution of IT, mis-measurement of new parts of the economy (though this is largely shown to be not large enough, suggesting that the slowdown is in fact real), persistent levels of large inequality, aging populations or robots taking over jobs. Whatever the cause, it is important to identify policies to reverse this trend in the interest of our long-term economic stability.
From the OECD: