Alan Blinder wonders what happened to our productivity gains:
Are you worrying about America’s recent dismal productivity performance? You should be. Productivity gains are the wellspring of higher living standards, and the well has been running pretty dry lately.
How dry and how lately? I prefer to date the slowdown in productivity growth from the end of 2010 because productivity growth (in the nonfarm business sector) averaged a bountiful 2.6% per annum from mid-1995 through the end of 2010, but only a paltry 0.4% since. Other scholars prefer earlier break points. For example, productivity growth averaged 2.9% from mid-1995 through the end of 2005, but only 1.3% since.
Either way, the drop is large, and the scary thing is that we don’t understand why.
The decline actually started around the turn of the century, when the housing bubble began in earnest — sucking a trillion dollars or so out of productive investments and into the sinkhole of bad real estate decisions. We enjoyed a blip of robust productivity gains during the financial crisis, when American business shed jobs like a nudist sheds his clothes on the beach — and those of us who kept our jobs redoubled our efforts to keep from losing them.
In 2009, Americans elected the most “progressive” President and Congress in our history. The very next year, ♡bamaCare!!! was signed into law, along with Dodd-Frank. Both are dense with job- and growth-killing regulations. The Democrats also effectively gutted the 1996 welfare reform act, resulting in a huge and ongoing transfer of wealth from the productive to the idle.
Is there really such a mystery?