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?
Certainly! The increase in productivity growth in the US during the late 1980s and throughout the 1990s can be attributed to several key factors:
1. Technological Advancements: The period saw significant advancements in information technology, specifically the widespread adoption of computers and the growth of the internet. These innovations enabled businesses to automate processes, streamline operations, and access global markets more efficiently, resulting in increased productivity.
2. Business Reorganizations: Many companies undertook organizational restructuring during this time, which allowed them to become more focused on their core competencies and adopt more efficient business practices. This led to greater specialization, improved resource allocation, and enhanced productivity.
3. Investment in Human Capital: Organizations invested heavily in educating and training their workforce during this period. Businesses recognized that a well-trained and highly skilled workforce could contribute significantly to productivity growth. Increased emphasis on education and training resulted in a more knowledgeable and skilled labor force, leading to higher productivity levels.
4. Globalization: The opening up of global markets and increased international trade during this period allowed businesses to tap into new customer bases and take advantage of economies of scale. This expansion of markets and global competition pushed companies to become more efficient, improve their processes, and innovate, ultimately driving productivity growth.
5. Regulatory Reforms: Various regulatory reforms, such as deregulation in industries like telecommunications and transportation, reduced barriers to market entry and fostered competition. This increased competition incentivized companies to streamline their operations, reduce costs, and improve productivity to stay competitive in the market.
6. Management Practices: The adoption of new management practices, such as total quality management and lean manufacturing, also contributed to productivity growth. These practices focused on eliminating waste, improving process efficiency, and enhancing product quality, all of which ultimately led to higher productivity levels.
To understand the specific reasons behind the increase in productivity growth during this period, you can refer to economic literature, academic studies, and historical analysis. Additionally, analyzing economic data such as GDP growth rates, productivity measures, and industry trends can also provide valuable insights into the factors influencing productivity growth during the late 1980s and the 1990s.