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WASHINGTON — An ugly trend has been puzzling, and perturbing, economists. And under President Trump, it might get worse.

The trend is in a measure called “productivity” — basically, how much stuff we produce from a given amount of labor and capital. Productivity tends to rise over time, as new technologies help us find better, more efficient ways to churn out goods and services. Think: mechanized agriculture vs. horse and plow.

When productivity grows, the economy and living standards do, too. If we can produce more output with the same amount of inputs, the country gets richer. Thanks primarily to technological progress, the average U.S. worker today would need to work only about 17 weeks to earn the entire annual income of the average worker a century ago, in inflation-adjusted terms.

Trump has promised to make the United States much wealthier, and even to double the pace of gross domestic product growth. If he wants to achieve anything close to these goals — especially while a large chunk of the workforce is aging into retirement — he needs a burst of productivity growth.

Unfortunately for him, the trends have been heading in exactly the wrong direction.

After relatively brisk productivity growth in the late 1990s and early 2000s, the numbers slowed to a crawl starting around 2005. Worse, the Bureau of Labor Statistics just reported that productivity actually fell last year, for the first time since the end of the Great Recession.

In other words, the richest economy in the world somehow just got a little less efficient.

Experts aren’t sure what’s going on, but they have a few theories.

Some blame mismeasurement and argue that official stats don’t capture the full value of newfangled freebies such as Facebook. But a Brookings Institution paper last year found that counting the market value of all free media would change output and productivity numbers very little. Besides, even in industries far removed from Snapchat, productivity growth has slowed.

Demographics could be to blame, a new International Monetary Fund report argues, since an older workforce can be less productive and innovative. Reduced business dynamism — fewer start-ups and fewer failures of older, less-productive “zombie” firms — may play a role, too.

The most troubling explanation, though, is that we may have already wrung most of the productivity gains we can out of the computer age, and we haven’t seen similar high-value inventions since. Moreover, the next generation of economy-transforming ideas might just be harder to find.

That’s not the same as saying there’s nothing left to invent, though sometimes the argument gets caricatured that way. Promising developments remain in the pipeline, in self-driving cars, the “Internet of Things,” biotech research and so on.

Until then, the policy tools available for increasing productivity growth are limited. They do exist, though, and Trump appears to be not only ignoring them, but pursuing pretty much the opposite agenda.

For example, if you want to get more innovation, you (duh) need more R&D — especially the basic research that could produce gains across multiple industries. Basic research tends to be less attractive to private companies for exactly this reason, though; businesses don’t want to foot the bill if they won’t capture all the proceeds.

That’s why public funding is useful — and why the Trump administration’s plan to cut the budgets of the National Institutes of Health and other science agencies is so backward.

Welcoming more immigrants — who tend to be younger and to found new businesses at higher rates than non-immigrants — would also be helpful, particularly if they’re high-skilled. As would investing in education and training for workers already here.

Infrastructure spending can help promote private-sector productivity, and it’s something Trump has expressed interest in. But his plan to give tax breaks to private firms to build revenue-producing projects is not obviously the right strategy for this goal.

Finally, transformative innovations need not necessarily come from the United States. It’s nice if they do, but if the ideas are big enough, American industries will still benefit.

What may be best for U.S. productivity growth, then, would be to encourage the progress of China and India toward becoming developed market economies — to help draw out from their combined 2.6 billion citizens more “Steve Jobses and Thomas Edisons,” as San Francisco Federal Reserve researcher John G. Fernald puts it.

That probably means — my words, not Fernald’s — more engagement with the world, and a focus on institution-building and freer trade. Broadly speaking, it means no longer viewing the global economy as a zero-sum game.

Again, not exactly at the top of Trump’s to-do list. That’s both his loss and ours.

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Catherine Rampell’s email address is crampell@washpost.com. Follow her on Twitter, @crampell.

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(7) comments

Emerald Fox

Here's a thought, instead of encouraging young immigrants to come here why not tap into the over 300 million people we already have? There are no doubt millions of young Americans that could contribute to our nation's success if given a good education and a decent wage. Why not put our own people first?
Thanks.

johnnybragatti

All Libs miss the mark...
who knew ,
and it was the Soviets who saved John Deere, from Bankruptcy.
MS, Curious to should try to be more curious,
and perhaps more intellelctual.
Econ,in any school, will teach "balance",
over one side owning everything.

Mr Curiosity

As she does so often in her articles, Catherine again misses the mark. Like all liberals she fails to understand the role that government plays in productivity - or should I say the lack of productivity. Obama didn't start the trend but he put the "pedal to the metal" in accelerating the massive burdening of regulatory micromanagement onto our society - across the spectrum. Each year the Obama administration imposed more regulations that the year preceeding it. 81,000 pages of new regulations - in 2016 alone! Let me repeat that - 81,000 new pages of regulations were introduced in 2016 ALONE. The cost ? Obama has imposed over 120 Billion PER YEAR in new regulations. Highways take years to build, pipelines decades to complete, new office buildings take 7 years to approve; As Catherine was kind enough to point out - in 2016 we experienced the first year of reduced productivity since the GREAT DEPRESSION IN 1929. And she has the gall to state people are confused about why. Why indeed. She need look no farther than the mountains of regulatory burden that have been placed upon society. Like all good liberals, she feels that throwing money at the problem is the best way to fix anything. As Reagan so adroitly observed: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. Catherine sees the economy has stopped - so subsidize it - with more of your money. I have a better idea. Take the 600 pound Gorilla off the backs of our financial, health care and construction industries. Fire 75,000 regulators and dump the regulations they wastefully administer. You will see productivity increase as you have never see it before. Banks will go back to lending instead of filling out reports. Construction firms will be able to build instead of worrying about disrupting the mating habits of the purple tailed gecko; and doctors will be able to go back to providing health care instead of filling out a 30-40 minute questionnaire for every office visit on their schedule. THAT is where our productivity is going.... into nonsensical forms and paperwork - all of which are reviewed by another non-productive government worker. What Catherine fails to understand is that Government workers produce nothing. ZERO ! Every government worker hired reduces national productivity. All they generate is paperwork. The only way government gets money is to take what you have and spend it on themselves. They have ZERO dollars that don't come out of your pocket and mine. So Catherine - we don't need to spend more money on government programs to increase productivity. In fact it works just the opposite. The less government we have, the more productive our nation will become. That's why Catherine, if you put up a chart that showed the growth in government and the reduction in productivity, you would see that they are directly inverse to one another. As one grows, the other shrinks. So much so that we have now reached the point where productivity is going backwards.

kingman10

Curiosity you just blew it. Re-read the article especially the part about less productivity. 2016 was the first year of decline of productivity since the great recession, not depression! So that would be around the year 2008 not 1929. Your reasoning just went out the window, your opinion is null and void. Blaming big bad government for every economic evil is echoing the republican platform for the last fifty years. Corporate America would love to pollute and rape our natural resources at the expense of the rest of us. Big business would love to take advantage of an economy where they could prey on the average worker and consumer without the interference of big bad government. That tired old sound bite you keep hollering is redundant and without merit. There are many reasons for reduced productivity, if it can be accurately measured, and the biggest surely is an aging work force.

johnnybragatti

Spots on exactly and Curiosity,
is no doubt an aging aged individual.

kingman10

hello curiosity.. you there?

MelloRedBuggVet2Lax

"...we may have already wrung most of the productivity gains we can out of the computer age..." And out of people?

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