Theories abound as to why U.S. productivity growth has stalled. Economists attribute it to everything from a slowdown in business investment to inadequate measurement techniques that fail to capture efficiency gains from new technologies.
A recent research note from J.P. Morgan Chase offers another theory: It’s at least partly because the American workforce as a whole is simply less skilled than it used to be.
That matters because productivity growth drives wage growth, which by some estimates has stagnated for most of America’s workers.
Growth in “labor quality,” a measure of the skill set of the average worker, has declined in the last few years, according to the report. In 2015, the growth in overall workforce skills contributed less than 0.1 percentage points to GDP growth, the smallest contribution of labor quality to growth since 1979. Michael Feroli, the author of the note, estimates that contribution will remain below 0.1 percentage points for the next few years.
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