A productivity perspective on the future of growth

Throughout history, economic growth has been fueled by two factors: the expanding pool of workers and their rising productivity. From the perspective of rising prosperity, however, it is productivity that makes all the difference. Disparities in GDP per capita among countries -- or between the past and the present in the same country -- primarily reflect differences in labor productivity. That in turn is the result of production and operational factors, technological advances, and managerial skills. As managers improve efficiency, invest, and innovate to be competitive, their collective actions expand the global economy. The past 50 years have seen unusually rapid growth in GDP and GDP per capita. Given the demographic drag that's already coming into play, prospects for future growth -- and the related implications for debt levels and future pension liabilities -- will depend very heavily on sustained productivity growth. But arriving at useful forecasts of the productivity of future workers can be difficult.