Fewer workers is one of the key reasons for our stagnant economic growth. Over the coming decades, the labor force is expected to shrink in most parts of the world as fertility rates continue to decline, especially in advanced and emerging economies. The US labor force is growing very slowly while fertility rates keep hitting record lows.
Our aging economies are thus dependent on productivity gains to drive long-term economic growth, future prosperity and higher standards of living. Which is why few topics have generated as much concern among economists and policy makers as the sharp decline in productivity growth in the US and other advanced economies over the past decade, - despite accelerating technology advances.
“Labor productivity growth is near historic lows in the United States and much of Western Europe,” noted Solving the Productivity Puzzle, a report published earlier this year by the McKinsey Global Institute (MGI). The report analyzed the productivity-growth declines across a sample of seven countries, - France, Germany, Italy, Spain, Sweden, the United Kingdom, and the United States, - which represent about 65% of the GDP of advanced economies. Their average productivity growth in the 5 years between 2000 and 2004 was 2.4%. A decade later, - in the 5 year period between 2010 and 2014, - their average productivity growth had declined to .5%. While starting to pick up recently, productivity growth remains at or below 1 percent in many of the countries in the study, still quite low relative to historical levels.