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Organizational Linkages: Understanding the Productivity Paradox
regardless of where it occurs. Thus, a productive nation is desirable for the contributions it makes not only to the quality of life of its people but, ultimately, to the quality of life of those in other nations as well. Some management theorists have identified productivity growth, particularly in knowledge and service workers, to be the greatest challenge now facing the developed countries of the world. They predict that it will determine the fabric of society and the quality of life in every industrialized nation and that without productivity growth the world will face increasing social tensions, polarization, and radicalization (e.g., Drucker, 1991).
Trends of Productivity Growth in the United States
The United States has experienced more than 25 years of declining productivity growth. Between 1965 and 1985, for example, the U.S. position in the international automobile, steel, shipbuilding, and textile industries deteriorated significantly. More recently, the U.S. position in electronics, computers, robotics, and biotechnology has slipped (Johnson and Packer, 1987; Wohlers and Weinert, 1988). The U.S. labor force does not appear to be making the contribution it once did to the productivity of the world economy.
In a more recent analysis of U.S. productivity growth, the Urban Institute (Sawhill and Condon, 1992) reported that between 1973 and 1990 the hourly output of an American worker grew only 0.7 percent a year. In contrast, the annual rate of growth between 1948 and 1973 was 2.5 percent. According to this analysis, if worker productivity—the basic determinant of wages—had continued to grow at the same rate after 1973 as it did before, the typical family's income in the United States in 1990 would have been $47,600 instead of $35,300.
What is the problem? Has the United States not been investing in productivity growth? There are indeed areas (e.g., infrastructure and education) in which inadequate investment may be inhibiting U.S. productivity. On the other hand, the United States has actually been investing heavily in advanced technologies to enhance productivity growth. The returns, however, do not appear commensurate with the investments. For example, one analysis showed that the data processing budgets for U.S. corporations increased by about 12 percent a year over the previous decade. Productivity increases from those investments, however, averaged less than 2 percent a year (Weiner and Brown, 1989).
In Chapter 2, Attewell reviews a number of investigations of the