Like a movie that changes from fast- to slow-motion and then gets stuck on a single frame, America's productivity rate is creeping closer to a dead stop.
For two decades following World War II, productivity in the U.S. sprinted up the growth charts untiringly. Spurred by a labor force anxious to get back to peaceful industrial employment and by a string of technological breakthroughs that gave the U.S. a commanding lead in product markets around the world, the American economy seemed unfailing and unstoppable.
But the rise began to slacken about a decade ago. In the past 10 years, productivity gains averaged 1.6 percent a year, only half the rate of the golden-growth days. This year, productivity has taken an even sharper turn for the worse, showing almost no increase at all.
Barry Bosworth, director of the President's Council on Wage and Price Stability, told a congressional committee recently: "We're turning into the British situation of the early '70s when they had almost no productivity growth." Calling the slowdown "a real puzzle," Bosworth said the U.S. has practically stopped showing gains in output per hour worked.
Moreover, the slump has been wide-spread. About two-thirds of the 67 industries regularly surveyed by the government have registered productivity declines. What makes the slow-down even more critical is that while productivity has been falling in the United States, it has been rising in Europe and Jpan. Since 1967, the productivity rate has surged ahead 105 percent in Japan, 54 percent in Italy and France, and 39 percent in Canada. Even Great Britain topped America, edging past the U.S., 25 percent to 24 percent.
The meaning of all this is simple enough - and deeply disturbing. Without a gain in productivity.
Inflation will be more difficult - probably impossible - to control.
America's ability to compete in world markets will continue to weaken.
Real wealth in America will shrink, effectively strangling the campaign against poverty and eroding everyone's standard of living.
But what is behind the slump is much less simple and less certain. Some say it is the result of basic shifts in the economy - we have been transformed, so the story goes, from a nation of industrial workers to one of lawyers, insurance agents and real estate brokers. Others blame the lag in productivity on environmental and safety rules which have redirected business investment into less productive (though perhaps more socially desirable) ends. Still others cite a change in both worker and management attitudes - people, they say, don't want to work as hard as they used to, and corporate managers have lost the sense of adventure and the willingness to take risks that was once their mark in trade.
In any case, the sense of desperation mounts as productivity indicators slide. The national doomsayers club has never had so many illustrious members.
"America's economic survival will depend on its ability to increase its rate of productivity advance to former levels," General Motors Corp. Chairman Thomas Murphy said in a recent interview. "That is no exaggeration."
"You've got to be worried," said Irving Shapiro, chairman of Du Pont. "You can't be comfortable about the future, you can't be sure your earnings will be real earnings without gains in productivity."
The term "productivity" has different meanings to different people. It is often associated with other words like "efficiency," "automation" and "hard work." In some minds, it conjures up images of a production line running faster and faster.
But basically the productivity rate is a measurement of outputs divided by inputs, computed quarterly by the Bureau of Labor Statistics. It is, simply, what you get out (automobiles, ice cream cones and so on) for what you put in (labor, capital and other resources).
Despite all the fuss over what's happened to U.S. productivity, no one on the national level appears to be doing much to meet the emergency. The one federal agency specifically charged with attacking the problem is going out of business at the end of this month. Established in 1970 to find ways of improving productivity, the National Center on Productivity and the Quality of Working Life runs out of money on Sept. 30, with both Congress and the White House content to see it go. Underfunded and politically orphaned from the start, the center was ruled ineffective and expendable in a General Accounting Office report this year.
George Kuper, the center's director, calls it a mistake to eliminate the center without providing something in its place. "Productivity growth is not automatic," Kuper said. "In view of the dismal productivity record of the American economy over the past ten years, there is an urgent need for a concerted effort to bolster the forces that sustain productivity growth."
But administration officials contend that the productivity problem is not something the government can solve by creating a center. "The best thing we can do for productivity is to create a healthy climate for private investment," said one administration official. "In the final analysis, productivity is basically the responsibility of the private sector."
A few businesses and industries have made encouraging efforts to spur efficiency on their home turf. Methods tried range from streamlining production lines and reorganizing work teams to fattening up compensation plans and instituing so-called "flextime" programs that allow employes some lattitude in setting working hours.
On the whole, though, the self-help record of American industry on this score is sadly deficient. Spoiled by the ease with which productivity gains flowed during in the early postwar period, managers have been slow to respond to the current crisis.
"They figured it was something that would always be there," said C. Jackson Grayson, former business school dean and head of the wage and price council during the Nixon administration. "Magagers have ignored productivity and played the game of money and demand management. Most companies have no explicit program to improve productivity."
To foster greater national awareness of the problem, and to help corporations establish their own productivity improvement programs, Grayson last year set up his own center on productivity in Houston founded on $8.5 million contributed by more than 80 companies.
But the reason for management's sluggishness in taclling this issue may have more to do with a lack of inspiration than with any lack of awareness. The mood of the American business community today is characterized more by despair by diligence, and the sense of malaise is worsening.
Surveys b the Conference Board, a New York-based economic research group, show business confidence in the economy has declined steadily since the surveys began two years ago. This lack of faith has translated into a reluctance on the part of many managers to invest in new equipment and larger plants. Termed by some a "capital strike," such lag in investment has been a major contributor to the slow-down in productivity growth in recent months.
The malaise feeds on itself because, without new investment, business processes age, productivity declines, proits shrink and industries grind to a halt. It is true that unemployment has dropped to record lows in recent months. But what this suggests is that ouput has been increased by putting more people on payrolls, not by improving each person's capacity to produce. This can go on only so long.
What accounts for management's depressive state of mind? "A heritage of economic trauma of the past decade," said Edgar Fiedler, director of research for the Conference Board, who proceeded in an interview to tick off a list of economic jerks and jolts that have shaken the confidence American managers once had in their economic machine, leaving members of the business community scurrying for their security blankets.
His list included the acceleration of inflation, the erosion of profits, the end to the old international exchange rate system, shortages of goods and resources, the first peacetime wage and price controls, the oil embargo and two recessions. "Little wonder that everyone is feeling shaky about the future," Fiedler concluded.
But sagging confidence and a falloff in capital investment only go part way in explaining what might be behind the slump in productivity. A good bit of th slowdown, say the experts, may have been inevitable.
Edward Denison, a Brookings Institution economist and one of the nation's leading authorities on productivity, says some of the steam was bound to run out of the U.S. economic engine. He notes two forces - the migration of farmers to factory jobs and the mass education of society - that initially powered America's postwar industrial drive have now run their course. Also, he says, the influx of relatively inexperienced teenagers and women into the work force has acted as a productivity depressant, albeit a temporary one.
Beyond these, Denison blames the growth of government regulation for squeezing out much of the productive energy that was left.
Of course, productivity alone neither makes nor breaks a nation. It is just one element - although an important one - in the overall growth equation. Other factors include a nation's resource base, its entrepreneurial spirit, and its rate of savings and investment.
Also, in weighing political choices, a nation often finds itself balancing certain quality-of-life goals such as cleaner air and guaranteed safety against the moneyed concerns of efficiency and economic growth. To the extent American industry's slower growth is the natural outcome of ensuring greater health and safety for consumers, it is plainly and simply the people's choice.
Denison, however, is worried that the trade-off might have tilted too far, particularly in recent months. "The outlook is extremely uncertain," he said. "I've never seen a period like this before."
Part of the uncertainty reflects not only confusion about the source of the downward trend, but also misgivings about the numbers themselves. The situation may not be as alarming as the figures suggest.
This is because the methods used to collect national input/output data leave room for inaccuracies. Also, the traditional way of measuring productivity ignores many social welfare gains and only incompletely accounts for improvements in quality.
Still, the figures always have been subject to such qualifications. Many experts say what counts in the current debate is not so much the accuracy of the measurements but their startling, stubborn slide relative to the way they always have been computed.
In any case, there is cause for hope. As the negative effect of the influx of unskilled workers reverses itself, and as industry becomes accommodated to regulatory standards, U.S. productivity should climb again. The Bureau of Labor Statistics estimates that it will be back to about the 2.5 percent rate by the early 1980s.
But few experts believe America will return to its postwar rate of more than 3 percent. As Denison put it, "In the long sweep of history, the high postwar rate is an aberration."
Many businessmen tend now to write off the economy's stumbling performance during the Seventies as a costly learning experience, a period of expensive adjustment from which American managers soon will emerge with renewed vigor and a stronger sense of direction. "The Seventies had an enormously revolutionary impact," said Du Pont's Shapiro. "It's has been put, the ability to "work smarter."
Innovation will cue off of an improved economic climate for risk capital, though not everyone agrees on how best to achieve this. Business is arguing for lower taxes and less regulation.Labor says that if tax cuts go anywhere, they should go to consumers to spur spending and, in that way, improve general business conditions. Congress and the White House are debating what the mix should be.
There also is no easy way to get people to "work smarter." Observers note that U.S. business generally has been good at harnessing muscle but notoriously poor at harnessing intelligence.
Much of the internal challenge that corporations faced in the last decade concerned adjusting to a change in employe attitudes toward work and the work place. The robot theory of mass production is out; in its place has risen the "quality of worklife" program, stressing teamwork and giving workers a greater voice in determining what they do and how they do it.
Such changes can lead to a happier, more productive plant. But movement here generally has been sluggish, slowed both by management resistance and union reluctance.
"You can't do the things you did before," said GM's Murphy of the change in labor-management relations. "It's not enough today to follow the old Army tradition of 'do as we say and don't ask questions.' But what do you do? It's always been a difficult thing to find the better way."