Between 1968 and 1980, the US economy experienced a slowdown in productivity growth. However, since the mid 1980s, the economy has experienced increases in the growth rate in productivity. Can you give reasons why US productivity growth started to increase during the late 1980s and continued throughout the decade of the 1990s?
Computers, faster telecommunications, and the reduction of several trade barriers (NAFTA and GAPP) to name 3.
The increase in US productivity growth during the late 1980s and throughout the 1990s can be attributed to several factors. Here are some key reasons for this:
1. Technological advancements: The period from the late 1980s to the 1990s witnessed significant advancements in technology, particularly in the field of information technology. The widespread adoption and integration of computers, the internet, and other digital technologies allowed for more efficient and effective operations across various industries. These technological advancements contributed to improved productivity by automating tasks, enhancing communication, and streamlining processes.
2. Investment in research and development (R&D): During this period, there was an increased focus on R&D investment by both the private sector and the government. This investment led to the development of new products and processes, which subsequently increased productivity. Companies invested in R&D to create innovative technologies, products, and services, fostering economic growth and boosting productivity.
3. Structural changes in the economy: The 1980s and 1990s saw significant structural changes in the US economy. There was a shift towards a more service-oriented economy, with increased emphasis on industries such as finance, telecommunications, and professional services. These industries tend to have higher productivity levels compared to traditional manufacturing sectors, which contributed to overall productivity growth.
4. Increased competition and globalization: Globalization and increased competition also played a vital role in driving productivity growth during this period. As countries opened up their markets and trade barriers were reduced, businesses faced increased competition from foreign firms. This forced companies to become more efficient and adopt new technologies and practices to remain competitive, leading to higher productivity.
5. Workplace organization and management practices: The 1980s and 1990s witnessed changes in workplace organization and management practices. Concepts such as Total Quality Management, lean manufacturing, and continuous improvement gained prominence. These practices aimed at optimizing operations, reducing waste, and increasing efficiency, thereby driving productivity growth.
It is important to note that these factors are not exhaustive, and the increase in productivity growth during the late 1980s and throughout the 1990s is a complex phenomenon influenced by multiple interrelated factors.