Productivity growth, which reflects advances in technology, management and worker’s skills, is considered to be the base for generating higher incomes. Since the late 1940s, American labor productivity growth has averaged around two percent per year. According to the Bureau of Labor Statistics, productivity increased by only 0.5 percent in 2014. Dismal as it was, it was a slightly higher rate than during the previous three years.
The reasons given for the collapse in American productivity are many and varied. Some economists say it isn’t being measured properly. Some contend that American technology and innovation are seriously lagging. Others think the low rate of business investment during the years following the Great Recession is the reason behind the poor productivity growth rate. Some other analysts believe that the expansion of special-interest concessions has reached the point where they are becoming a detriment to productivity growth.
With no agreed-upon cause, there is no clear remedy that politicians can easily implement. Most analysts do agree that better schools, increased research and more spending to replace the nation’s decrepit infrastructure could make a difference over the long-term. With income inequality at the highest level since before the Great Depression, America desperately needs a rebound in productivity growth to boost lagging incomes. The growing political movement calling for the increased redistribution of wealth from the richest classes to other groups is a reflection of the stalled productivity issue. And it could turn out to be the only alternative capable of staving off a permanently fractured society.
China with 596 billionaires now has more than the United States which is home to 537. China is the world’s second largest economy. Between 1980 and 2010, it reduced the number of people living below the official poverty line by approximately 600 million. The Chinese government has begun mulling over ways to help uplift another 70 million. With China’s rapid economic growth slowing, a growing number of economists think the possibility of another global recession is increasing. The downturn, if it comes, is expected to be of short duration.
The American economy is expected to grow around 2.5 percent this year. There are worrisome signs as the recovery continues its slow, steady course. The economic experts are becoming increasingly concerned about the inability of the industrialized world’s economies to grow at satisfactory rates despite the loose monetary policies that have been in place since the financial crisis of 2008. Before the collapse, the problem appears to have been too much easy lending. Today, a number of economists think the problem may be that not enough current lending is being channeled into productive investment.
Beset with stagnant wages and shrinking benefits, American workers are struggling to save enough for retirement. Nearly half of all employees don’t have a retirement plan at their place of work. About 29 percent of workers between the ages of 50 and 64 lack any retirement savings. As a consequence, they will be relying solely on Social Security benefits for retirement income. At the other end of the income spectrum, the combined retirement funds of the nation’s 100 largest chief executives are worth an estimated $4.9 billion. This amount is approximately equal to the total retirement savings of 41 percent of America’s families.
Most people do not distinguish between good and unscrupulous capitalism. They are caught up in a world where the winners are unleashing uncertainty, gobbling up a growing share of national income and the existing economic order is rapidly changing. Skills security and job security appear to be disappearing in an ever roiling economy. A Gallup poll found that big business ranks near the bottom with just 21 percent of Americans expressing confidence in the institution. Only Congress received a lower rating.
The feeling of growing unease is understandable since good jobs with benefits are becoming more elusive. A University of Michigan study found that the 1,200 firms that have gone public in the U.S. since 2000 have each created fewer than 700 jobs. It is an indication that old jobs are being automated out of existence while the implementation of new technology brings fewer jobs with it.
The federal deficit for the fiscal year ended September 30, 2015 is expected to be around $426 billion, continuing the steady downward trend. With the federal debt pushing past the $18 trillion mark, the gridlocked Congress has not been able to agree on a medium-term debt reduction plan. Looking at it from another prospective, American society has been financially irresponsible for decades. It continually wants more from the government than it is willing to pay in taxes and is letting borrowing make up the difference.