After a dismal 0.2% decline in productivity in the third quarter of 2019, American workers bounced back through October to December, recording an increase in productivity of 1.4%. This comes from a recent report from the US Department of Labour who use nonfarm productivity which measures hourly output per worker across all American industry besides the farming industry.
Whilst productivity has made a positive comeback in the US, the growth rate is still low, and economists are ascribing it to explaining the underwhelming levels of economic growth in the country in the last three years. Since 2017, the US economy has failed to once exceed Trump’s target of 3%, coming in at 2.4%, 2.9%, and 2.3% in 2017, 2018, and 2019 respectively.
One reason for the low growth rate of productivity could be the declining capital-to-labour ratio in the US. Usually, where economies employ a significant level of capital for each unit of labour, productivity levels are high and workers enhance their production capabilities. In order to overcome this problem, American policy makers will need to look at novel ways of improving productivity and increasing the levels of capital employed by firms across the economy.
THINK LIKE AN ECONOMIST!
Q1. What is meant by the term productivity of labour?
Q2. Explain one reason why workers may not be very productive.
Q3. Analyse the possible ways in which a firm could increase the productivity of its workers.
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