Productivity slump: A scarcity of economic growth

AMID all the new government programmes and tax cuts that have been proposed by the various US presidential candidates - or will be as the campaign unfolds - there lurks a nasty statistic that suggests how difficult they will be to achieve.

The statistic is 0.5 per cent. That's how much US productivity increased in 2014, reports the Bureau of Labour Statistics. Greater productivity - reflecting advances in technology, management and worker skills, among other things - is the wellspring of higher incomes. Since the late 1940s, gains in labour productivity have averaged 2 per cent annually. Last year's gain was a quarter of this average; even so, it was slightly better than in the previous three years.

Worse, most or all of these small increases will probably be siphoned off in government benefits for the expanding elderly population and in higher health costs. Other income improvements will result only from either (1) a rebound in productivity or (2) redistribution of income and wealth from one group to another. As a crude generalisation, Republicans emphasise improving productivity and economic growth, while Democrats focus on redistributing from the rich to the middle class and poor.