Productivity growth occurs when an economy can generate more output from the same amount of inputs, more from fewer inputs, or even the same output from fewer inputs. In other words, an economy becomes more productive when a worker can produce more output in the same amount of time due to factors such as technological advancements, better equipment, improved skills, or more efficient processes. If you’re going to focus on an economic statistic, productivity growth is a good one.

But why, exactly? Here’s the famous explanation from Nobel laureate economist Paul Krugman: “Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” Despite a popular narrative you often hear on social media, the link between labor productivity and worker wages remains strong.

That said, I can hardly think of a better subject for a survey of economists than what the United States should do to accelerate productivity growth. In the new issue of International Economy magazine, about two dozen economic, policy, and financial experts were asked, “If you were offering advice to the next U.S. president, what policies would you suggest to boost stagnant productivity in the United States, which has been running below 2 percent for nearly two decades?”

The most common ideas for boosting productivity were increasing high-skilled immigration, especially in STEM fields; investing in education and worker training; improving transportation infrastructure; and fostering innovation through R&D spending, while limiting excessive regulation of emerging technologies like AI. So nothing startling, I guess. A lot of what a football coach might call “blocking and tackling.” Not startling, but incredibly important. While activists and journalists often show a soft spot for policy novelty—such as a modern monetary theory, the One True Tax Cut, or a mega-tariff around America—economic history and theory suggests getting the basics right should be the baseline when thinking about boosting productivity and economic growth—and living standards.

As it happens, one of the surveyed experts is Steven Kamin, an AEI senior fellow and former economist at the Federal Reserve. His response (italics by me):

[Let‘s] say I ran into the next U.S. president, perhaps while we were both bicycling in Rehoboth Beach, Delaware, and I only had five minutes to talk before his Secret Service escort shooed me off. I would focus on two key measures to revive our country’s flagging productivity growth. 

First, substantially step up investments in human capital. Ultimately, our ability to compete and thrive in a global knowledge economy will depend on the training, intelligence, and creativity of our workforce. But even though the United States ranks near the top of the OECD in per capita income, it ranks very much in the middle of the pack when it comes to public spending on education as well as test scores in math and science. Upgrading the country’s human capital stock will require, first, boosting funding for early childhood care and education, where U.S. national government spending is even weaker (0.33 percent of GDP) relative to the OECD average (0.74 percent) than for K–12. Second, bolster K–12 education, especially in the least-resourced schools serving the least-privileged children. Third, do more to help students both enter college and remain there to complete their degrees. Finally, as four-year colleges aren’t right for everyone, expand the provision of workplace training and technical education. 

But all of this takes money. And with public deficits and debts already on an unsustainable path, increasing government borrowing is not an option, and no one agrees what spending to cut. This leaves raising revenue as the main option, and the second key measure I would recommend to revive U.S. productivity growth. Total U.S. public tax revenues (federal, state, and local) accounted for about 28 percent of GDP in 2022, well below the OECD median of 35 percent. As long as revenue measures are employed in an equitable manner that avoids creating undue distortions, they need not be at the cost of economic growth. If we are going to prepare our economy and our workforce for the twenty-first century, we will have to pay for it.

Great stuff. Any pro-progress policy agenda should put people at the center. It should recognize that the economy is a complex network of individuals and institutions working together to create value. An economy able to increase human flourishing, therefore, requires an educated and healthy populace, a concept I explore in my 2023 book, “The Conservative Futurist: How To Create the Sci-Fi World We Were Promised.” So when you listen to political candidates talk about economic policy leading up to the November elections, make a mental note if they mention improving America’s productivity capacity and their specific ideas for doing so. At least some of those ideas should probably be ones cited in this post.

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