M A R C H 2 0 11
m c k i n s e y
g l o b a l
i n s t i t u t e
Five misconceptions about productivity
As the US economy begins to recover, addressing some of the myths onproductivity is more important than ever.
Vikram Malhotra and James Manyika
President Obama recently used his weekly radio address to insist that the United States can outcompete any other nationon earth if only we “unlock the productivity” of American workers. But the president’s advocacy of productivity—getting more or better value for each hour worked—as the key to competitiveness mayfall on deaf ears in some quarters. Longstanding misconceptions continue to undermine rational debate on productivity. Here are a few of the most pervasive. Productivity is not a priority. The UnitedStates relies more than ever on productivity gains to drive GDP growth. Productivity generated 80 percent of total GDP growth in recent years compared with 35 percent in the 1970s. Now, due to ourcountry’s shifting demographics, we’ll have to do even better. In the past, productivity gains and an expanding labor force made equal contributions to economic growth. But this is changing as babyboomers retire and the number of women entering the work force levels off. If labor-force growth slows as projected and productivity increases at the average 1.7 percent annual rate posted since 1960,annual GDP growth will fall to 2.2 percent from its historic average of 3.3 percent. Americans on average would experience slower gains in living standards than did their parents and grandparents. Toprevent this, productivity growth needs to increase to an annual rate of 2.3 percent—a rate not achieved since the 1960s. Productivity is a job killer. Many Americans suspect that productivity is ajob-destroying exercise. They point to the period since 2000, when the largest productivity gains in the United States came from sectors that have seen large job cuts, such as electronics and other...