11-14-2016, 05:28 AM
Over time, low-productivity sectors have become a larger share of the economy, while high-productivity goods production has become a smaller share. And an economy dominated by industries with low productivity growth is going to grow slowly.
The productivity paradox: why we're getting more innovation but less growth - Vox
This week the White House proposed a new plan to increase labor market competition and wage growth in the United States — one that prominently featured a call to state governments to rein in "noncompete agreements." These arrangements — far more widespread than most people think — prohibit employees from leaving to join or start firms within the same industry as their existing employer. By reducing barriers to employee mobility and entrepreneurship, the White House seeks to both help firms hire the best workers they can and give individuals the ability to move to the job that is best for them.
A new White House proposal targets a hidden culprit holding down Americans' pay - Vox
What the two economists find is that the efficiency gains that were supposed to appear didn’t in fact happen. This study found that increased consolidation doesn’t have any significant effect on plant-level productivity. What it does have an effect on is prices (and profits): markups increased due to the consolidation of manufacturing firms. The increase in markups appears quite significant: 15 percent to 50 percent of the average markup in the data. In other words, the price of manufactured goods increased while there were no productivity gains. The increasing amount of rents in the manufacturing sector could very well have contributed to higher income inequality, either intrafirm or interfirm, depending on how the gains were shared within the company.
New research on market power and productivity - Equitable Growth
It seems that the Federal Reserve is starting to recognise that the decline in the equilibrium interest rate in the US (r*) has been driven not by temporary economic “headwinds” that will reverse quickly over the next few years, but instead has been caused by longer term factors, including demographic change. Because these demographic forces are unlikely to reverse direction very rapidly, the conclusion is that equilibrium and actual interest rates will stay lower for longer than the Fed has previously recognised. Of course, the market has already reached this conclusion, but it is important that the Fed is no longer fighting the market to anything like the same extent as it did in 2014-15. This considerably reduces the risk of a sudden hawkish shift in Fed policy settings in coming years.
It seems like the United States economy is enjoying more innovation than ever before. At the same time, statistics show the economy suffering from its slowest growth in decades. Analysts often try to resolve this by arguing either that conventional statistics aren’t properly measuring the value of innovation or else that the apparent speed-up in innovation is actually an illusion and progress is slowing down. Another possibility is that things are exactly as they seem: Rapid technological innovation is real, and so is slow economic growth. In fact, in a sense the innovation is causing the slow growth. Call it the productivity paradox, and recognize that it explains a lot about the current state and the future direction of the American economy.
The productivity paradox: why we're getting more innovation but less growth - Vox