Give some possible explanations of the productivity slowdown in the United States that occurred in the 1973–1995 period.

Question

What will be an ideal response?

Answer 1

Several possible explanations have been offered for the slowdown in labor productivity that hit the United States in 1973. One of the most common explanations is the increasing price of energy caused by the OPEC policies of the 1970s. However, this explanation has some flaws since energy prices fell in the 1980s, but productivity did not improve during that period. Another suggested explanation was the decline in labor force quality. Proponents of this argument point to the declines in SAT scores that occurred after the late 1960s. However, other indicators of labor force quality such as school attendance and graduation rates increased during this same time period. The best explanation seems to be a technology lag caused by the time period needed by businesses to realize the benefits of technological innovations produced in the 1970s and the 1980s. Such innovations as the personal computer and the Internet took some time to show a payoff in labor force productivity. An interesting analogy is the development of electric power early in the twentieth century. It took at least two decades for business leaders to realize the best ways to use electricity to increase their productivity. So it seems there might have been a similar “lag” in productivity increases during the 1970s and 1980s while businesses were figuring out the best ways to use all the advances in information technology and other innovations.