Labor productivity growth1 has been the engine of US economic power and prosperity since World War II, adding 2.2 percent annually to economic growth and contributing mightily to a 1.7 percent annual gain in real incomes.
But in the past 15 years, productivity growth has averaged just 1.4 percent, even as incredible advances in digital technology put a supercomputer in every pocket. This state of affairs is well known.
In the US economy, there’s also a problem with the income distribution. The link between productivity growth and real incomes has weakened. In the postwar boom from 1948–70, incomes grew at 3.0 percent annually, while productivity growth averaged 2.8 percent. More recently, real incomes have grown at 0.7 percent, well below the 1.4 percent gains in productivity, (Exhibit 1). Labor participation rates have fallen from 67 percent in the 1990s to 63 percent in 2019,4 as millions have become discouraged about work.
Returning US productivity to its long-term trend of 2.2 percent annual growth would add $10 trillion in cumulative GDP over the next ten years. This is equivalent to every US household seeing a cumulative income gain of $15,000 over that period.
It’s an aspirational prospect and one with historical precedent. In 1995, five-year productivity growth averaged 1.6 percent, only for productivity to jump to 3 percent the following decade. Recent technology advances, including in AI and biotechnology as well as productivity spikes since the global COVID-19 pandemic, raised hopes (albeit briefly) that perhaps another boost may lie ahead.
https://www.mckinsey.com/mgi/our-research/rekindling-us-productivity-for-a-new-era#introduction
2.2 Percent Annual Increase in Productivity
Who will manage it? Industrial engineers.
Industrial engineers have the knowledge, focus and skills to increase productivity through improvement of products, facilities and processes, and manage productivity improvement.
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3% productivity increase every year will make production double in 24 years from the same resources. Industrial Engineering increases prosperity of the society.
Industrial Engineering Strategy.
https://nraoiekc.blogspot.com/2014/11/industrial-engineering-strategy.html
https://www.mckinsey.com/mgi/our-research/rekindling-us-productivity-for-a-new-era#introduction
1949
Manufacturing sector All workers Labor productivity Index
Starting from 1949 = 33.50 to 2002 = 146.3
(1992=100) 33.500 34.000 33.800 35.200 36.400 37.300 38.800 38.600 39.400 40.000 40.900 41.800 42.800 44.200 45.700 47.400 48.500 49.100 50.900 52.700 53.500 54.200 57.800 60.300 61.400 61.200 64.300 67.000 69.700 70.400 69.800 70.100 70.700 74.200 76.700 79.500 82.300 85.900 88.300 90.200 90.300 92.900 95.000 100.000 101.900 105.000 109.000 112.800 117.600 123.300 129.700 134.900 137.300 146.300
1949 33.50
1991 95.0
1995 109.0
2002 146.3
Source: https://www.bls.gov/productivity/tables/home.htm
https://www.bls.gov/spotlight/2013/productivity/home.htm
https://www.ceicdata.com/en/indicator/united-states/labour-productivity-growth
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