Man Without Qualities

Tuesday, May 07, 2002

What Europe Can Teach Uncle Sam IV:
Productivity Equals Growth?

According to the New York Times, United States productivity soared at an annualized rate of 8.6 percent annual rate in the January-March period, following a strong 5.5 percent growth rate in the previous quarter. Short term productivity changes like this have more to do with employment decisions than technologically driven work enhancement. In this reported period, for example, some of the productivity improvement was obtained just by firing "redundant" workers. The Times article does mention that employment curtailment was involved here, but makes no attempt to unpack the 8.6% figure - preferring to include boilerplate about how long term productivity increases make for lower inflation and higher growth. It does when other conditions are right. But European economic performance shows that the boilerplate is not always true. High structural employment is perfectly consistent with no overall growth and high worker productivity - at least by some measures of productivity.

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