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Lagging Productivity Growth - 6/4/15

Productivity growth in the U.S., measured as output per hour worked, has lagged the efficiency gains observed in previous economic upturns.  There has been a large-scale debate in the economics community regarding the reasons for slow productivity growth.  There is a direct relationship between productivity growth and wage growth.  To the extent that productivity expands slowly, so too will wages all things being equal. 

When asked about productivity, economists in the Wall Street Journal’s May survey indicated a remarkable level of consensus on certain issues.  For instance, fully ninety-four percent of economists believe that weak capital spending has had an impact of slowing productivity growth.  Workers require innovative equipment and modern supply chains to increase hourly output, but weak capital spending means that this isn’t happening. 

Increased government regulation was cited by nearly two thirds of economists as having an impact.  Surveyed economists are not optimistic regarding the future of American productivity.  On average, forecasters believe productivity will expand one point seven percent over the next decade, far short of the three most recent upturns, when output per hour expanded two point eight percent on average.

Anirban Basu, Chariman Chief Executive Officer of Sage Policy Group (SPG), is one of the Mid-Atlantic region's leading economic consultants. Prior to founding SPG he was Chairman and CEO of Optimal Solutions Group, a company he co-founded and which continues to operate. Anirban has also served as Director of Applied Economics and Senior Economist for RESI, where he used his extensive knowledge of the Mid-Atlantic region to support numerous clients in their strategic decision-making processes. Clients have included the Maryland Department of Transportation, St. Paul Companies, Baltimore Symphony Orchestra Players Committee and the Martin O'Malley mayoral campaign.