AMERICAN PRODUCTIVITY stopped rising two years ago, and the social implications are distressing. Productivity measures the output of a typical hour's work, and when it stops rising, the standard of living stops rising as well. The reasons seem to be deeply embedded in the economy, and over the past two decades they have become more compelling. After a long period of rapid productivity growth, the first hints of a slowdown appeared in the late 1960s. In 1973, there was a sudden and dramatic break in the pattern. Since then progress has been much slower -- and now, in the nonfarm business sector, it has slowed to zero. The productivity figure that the Labor Department published last week for the first quarter of 1986 was the same as that for the first quarter of 1984.
Productiv in manufacturing continues to rise at a respectable rate, and agriculture has been making great gains. It means that productivity in the service industries is now actually falling.
The importance of this trend goes far beyond statistical technicalities. Several months ago the Joint Economic Committee published a report by Frank S. Levy of the University of Maryland and Richard C. Michel of the Urban Institute on the economic future of the baby boom. They found that people of that generation, most of them now in their late twenties, are having much greater trouble than their parents in achieving a middle-class standard of living. In the years from World War II to 1973, the two authors wrote, men typically doubled their incomes as they went from the age of 25 to 35. From 40 to 50, men's earnings rose 30 percent. But men who were 25 in 1973 had, on average, increased their earnings only 16 percent by the time they were 35, and men who were 40 in 1973 suffered an actual decline in wages over the following decade.
Those middle-aged workers who had job security and were buying houses on fixed-rate mortgages generally got through the 1970s reasonably comfortably. "But for people who had not yet attained the middle-class standard (or who lost the standard and were trying to regain it)," the authors concluded, "the standard looked increasingly out of reach." The underlying explanation is that strongly rising productivity is no longer carrying American incomes up over people's lifetimes.
How can you reconcile poor performance in productivity with the evident prosperity and high consumption that much of the country is currently enjoying? There the answer is simple. It's the tremendous flow of imports that Americans are buying on credit. But the decline of the dollar's exchange rate means that those imports are going to get much more expensive. Then the standard of living will fall with the dollar -- unless Americans can find a way to getheir productivity moving upward again.