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Rekindling an Old Flame: AI and the Past, Present, and Future of American Productivity Growth

Updated: Dec 13, 2023

by Grant Aung


In recent years, the American people’s views on the economy have, become characterized by a greater sense of negativity and dissatisfaction. According to Gallup (2023), the American people’s confidence in the economy as of August 2023, was 41 percentage points below what it was in 1996 when Gallup first started their economic confidence index. Using consumer price index (CPI) as the measure of inflation, the real wage of the median American only increased 0.7 percent from 1973 to 2019. It is thus no wonder that by some measures, millennials are the first generation in American history to be financially ‘worse off than their parents. According to Michael Hout, a sociologist at New York University, only 44 percent of Americans born in the late 1980s, are employed in jobs with higher socioeconomic status than their parents when both were age 30, with 49 percent in jobs of lower status.

At the heart of this economic malaise is stagnant productivity growth. A major way in which human beings can enjoy better material conditions over an extended period of time is through increases in productivity, that is the ability to produce a greater amount of output within a given number of inputs. Productivity growth increases the size of the total economic pie, allowing employers, workers, and shareholders to all enjoy a bigger slice. As Nobel-Winning economist Paul Krugman states, “Productivity is not everything, but in the long run, it's almost everything.”

During the post-World War II era, productivity growth was incredibly buoyant. Then from 1974 onwards, the US experienced a precipitous productivity slowdown. In the mid-1990s, America experienced a resurgence in productivity growth powered by booms in information technology (IT) and semiconductors. Yet from 2005 onwards, productivity once again slowed to a crawl. This paper recounts a brief history of productivity growth in the American economy since the post-World War II period in order to identify the causes behind the recent slowdown in productivity growth. To conclude, this paper will consider the prospects for a productivity resurgence, especially with respect to artificial intelligence (AI) and examine various policy ideas which might help contribute to such a resurgence.



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