A more productive U.S. economy could unlock $10 trillion
A more productive U.S. economy could unlock $10 trillion
For nearly 20 years, the U.S. economy has been lagging when it comes to worker productivity, according to a new report from the McKinsey Global Institute. Despite increasing technological capability, which should in theory make workers more efficient at their jobs, U.S. labor productivity has grown at a sluggish 1.4% since 2005, trailing the historical average.
And that comes with a price tag. In fact, McKinsey predicts that if worker productivity could be boosted back in line with the historical average, the U.S. economy could add about $10 trillion to gross domestic product by 2030. That money would help a U.S. economy dealing with inflation, debt and a shortage of workers. It would also help the U.S. economy make a transition to clean energy, McKinsey says.
Olivia White is a director at the McKinsey Global Institute and one of the authors of the report “Rekindling U.S. productivity for a new era.” She spoke with “Marketplace Morning Report” host David Brancaccio, and the following is an edited transcript of their conversation.
David Brancaccio: Econ 101: Remind me, economists like it when we get more done in a day.
Olivia White: Yeah, exactly. Productivity is how much output, economic output, you can produce in a given, say, hour of work.
Brancaccio: And you’d think — all these robots, all the silicon chips that surround us — that productivity would be shooting through the roof. That’s not what we have found.
White: That’s exactly right. And the fact is we’ve seen, over the past 15 years or so, productivity has lagged its long-term average.
Brancaccio: What benefits do you think would accrue if we were to boost productivity further?
White: Well, look, let me first emphasize that increased productivity can drive wages up while holding inflation down, because you get more done in a given unit of time. And there’s a clear historical relationship between wages and productivity. But also, increased productivity will help us care for an aging population, and the U.S. population is aging. It also helps manage debt, and meet social safety net program entitlements. So think Medicare, Social Security. And finally, in the face of the net-zero transition, it’ll help us get there more quickly and more affordably because it’ll help build a capital base.
Brancaccio: You’ve seen regional differences. Some places in the U.S. are just, frankly, more productive.
White: So we saw that there are seven states that have both above average productivity and above average growth in productivity. California, Massachusetts, New York, Texas, Colorado, North Dakota, Washington state. And then there are about 25 states that have both below average productivity and they’re growing productivity less quickly than the average.
Brancaccio: And the laggards include, I’ve seen the list: I think it’s Nevada, Michigan, Iowa and Arkansas are on that list, [among others]. Why? California may be more techy, even New York, Texas, I suppose.
White: What you just said David was what I thought we would see, which is, “Oh, well, there are some industries that are just more productive, and states with those industries are the more productive states.” We find, in fact, that’s not, in general, the bulk of the explanation. But instead, states that are more productive are home to cities themselves that have been more productive and growing faster in their productivity.
Brancaccio: There are many prescriptions that you offer, let’s pick a couple.
White: I’ll give you a list. One is making sure that companies have strategies that are tuned to their technologies. Then, incredibly important, make sure that you’re upskilling, reskilling your people so that they have the skills that they need to take most advantage of that technology.
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