Declining economic productivity

Decline in the rate of productivity increase
Lack of productivity
Reduction in productivity

Nature

Rates of increase of economic productivity have been falling in most countries for several years, causing concern about the future possibilities for development, economic growth and the capital market system to which the world is increasingly is committed.

Background

Concerns over declining economic productivity emerged prominently in the 1970s, when advanced economies experienced stagnating output growth despite technological advances. This phenomenon gained global attention as productivity slowdowns were observed across both developed and developing nations, prompting extensive research into underlying causes such as demographic shifts, diminishing returns on innovation, and structural economic changes. International organizations, including the OECD and World Bank, have since tracked and analyzed these trends, highlighting their implications for long-term economic growth and living standards.

Incidence

During 1989-1993, gross domestic product (GDP) and industrial output declined in absolute and/or relative terms in all ECE countries, especially in eastern and central Europe. In western market economies the decline differed from the well-known pattern of cyclical changes of the past. It has lasted longer and gone further than in the the past and has, in most countries, affected all economic sectors, including services, in particular the retail trade, transport and financial services. Any recovery is likely to be slow – just under 2 percent growth was projected as an average for western Europe in 1994 (actual figures are not yet available).

Claim

Declining economic productivity is a critical crisis that threatens our future prosperity and stability. If we ignore this alarming trend, we risk stagnating wages, shrinking opportunities, and eroding our global competitiveness. This is not a minor issue—it undermines the very foundation of our society’s growth and well-being. Immediate, decisive action is essential to reverse this dangerous decline before its consequences become irreversible and devastate generations to come.

Counter-claim

There was a turnaround in productivity the UK in 1992. With employment in manufacturing falling far more rapidly than output has been declining, productivity growth rose to 3.9% in the second half of 1992 from 2.1% in the first six months of the year.