From 2007 to 2016, productivity in the U.S. grew at about 1 percent—a historically low rate. In other recent periods, it’s been much higher: 2.6 percent from 2000 to 2007 and 2.2 percent in the 1990s. The divergence has left economist looking for answers about slumping productivity and how to fix it.
A host of reasons have been suggested for why productivity has been declining: slowing innovation, inefficiency in sectors that have become huge, inability to adequately measure innovations on the internet, and a lack of spending and investment, to name a few. To get a better understanding of how productivity varies across the county, Joseph Parilla and Mark Muro, both fellows at the Metropolitan Policy Program at the Brookings Institution, looked into productivity growth at the local level and how the geographical variation of productivity relates to the declining national figures.
It’s natural that productivity varies across regions. Across the U.S., there are varying resources, industries, workers, technology, government policies, and incentives that play into how businesses and workers develops. But Muro and Parilla believe that productivity is often overlooked when studying local economies. That, they say, is a mistake, since productivity is key for long-term wage growth and improving living standards.
The difficulty in studying localities and comparing them with the national picture is largely because of the lack of comparable data. At the Labor Department, productivity is measured by comparing labor input (hours worked) to a sector’s output (in dollars). At the regional scale, Parilla and Muro use metro-level output from Moody’s Analytics and employment data from the Bureau of Labor Statistics to estimate local productivity. In doing so, they observe massive variations across the U.S. economy, from an average …read more
Source:: The Atlantic – Business