Productivity growth has stalled since 2005 (and isn’t about to improve soon)
Peter Martin,Visiting Fellow, Crawford School of Public Policy, Australian National University Not long ago it seemed as if the future was going to get better and better — not long ago at all. The high point was around 2005, fifteen years ago. I don’t know if you can remember how you felt at the time, but for me the surge in living standards, driven by an ever-building surge in output per working hour (“productivity”) suggested things were building on themselves: each new innovation was making use of the ones that had come before to the point where…. Ray Kurzweil, now the director of research at Google, summed it up in a book released in 2005 itself, titled The Singularity Is Near. Singularity was “a future period during which the pace of technological change will be so rapid, its impact so deep, that human life will be irreversibly transformed”. Changes would build on each other to the point where everything changed at once. Kurzweil dubbed it the “law of accelerating returns”. Year by year in the leadup to 2005, Australia’s productivity growth had accelerated to the point where in the 15 years to 2005 it had grown 37%. If it kept accelerating… In the 1930s economist John Maynard Keynes foresaw “ever larger and larger classes and groups of people from whom problems of economic necessity have been practically removed”. On average the working week might fall to 15 hours. In the 1970s, futurologist Alvin Toffler spoke of a four-hour working day. And then from 2005 on productivity growth collapsed. In the 15 years since, Australia’s output per working hour (productivity) has grown by just 17%. Thirty seven per cent turned out to be the high point. And not only here. In the United States and other developed economies productivity growth is divided into “before 2005” when it […]