Economic productivity is incredibly important to the long-term health of the United States. A gain of just two percent in the US productivity rate means the country is getting wealthy more than twice as fast. A more productive economy keeps high-paying jobs in the United States. A US worker who is twice as productive can compete with a foreign worker who makes half as much.

US productivity has doubled in the past seven years, mainly due to the use of information technology in US enterprise. This is an area where the US leads the world, and it is an area that can keep the US ahead.

It is vitally important that the federal and state governments support research and education in this area.

• Why does an increase of 2% in the productivity rate cause us to get wealthy twice as fast?
• Who says that productivity has gone up in the last few years?
• Who says this productivity improvement is due mostly to use of IT?
• If the US is doing so well now, why invest more in IT-related research and education?
• Research is someone else's responsibility - why do you say education is important a well?
• Where can I go to find more data?

1.Why does an increase of 2% in the productivity rate cause us to get wealthy twice as fast?
Answer: The productivity rate is the wealth rate. Double it and you get wealthy twice as fast. Productivity for the two decades from 1975-1995 was generally less than 2%. Since 1995, productivity has about doubled over the previous two decades.

2. Who says that productivity has gone up in the last few years?
Answer: Alan Greenspan, the head of the Federal Reserve, says so. But he gets his information from people like Dr. Dale Jorgensen of Harvard University, who is widely regarded as the world's leading productivity expert. No leading economists dispute this fact.

3. Who says this productivity improvement is due mostly to use of IT?
Answer: Again, it is Jorgensen - he is an expert about why productivity rises or falls, as well as an expert on the numbers. As late as the early 1990's, Jorgensen himself used to dismiss the argument that IT was improving productivity. But he changed his mind (pdf) when he saw the numbers from 1995 onward. Economics has progressed a lot on this issue in the past five years.

4. If the US is doing so well now, why invest more in IT-related research and education?
Answer: The benefits we saw kicking in over the past few years were based on investments made in the 1960s, 70's, and 80's. A lot of the productivity payoff is based on new knowledge that got turned into IT products and services. We need to continue that research, but we also need to invest in new research that helps us better understand how to exploit IT for maximum productivity gains.

5. Research is someone else's responsibility - why do you say education is important a well?
Answer: The productivity improvements do not come from computers or software or networks by themselves. Productivity is improved by applying IT to the work of the economy. We need vastly greater knowledge of how to do this in the US workforce. Other countries can out-compete us on low labor costs only if we can't outperform them. We need everyone in the society educated enough to improve productivity and quality on a consistent basis for decades. We need to do a better job of preparing people with the skills they will need for this. We also need to do a better job of putting IT to work in improving education itself. We have been trying at this for a long time, but it is hard to do. It took us 20 years to learn how to get the productivity payoffs from IT in manufacturing and commerce, and we still are not done. Education is a greater challenge. We will get the productivity payoffs in education only if we keep trying.

6. Where can I go to find more data?
Answer: A good first stop would be John L. King's article " IT Responsible For Most Productivity Gains" that appeared in CRA's Computing Research News in September, 2003. Here's a tease:

The "productivity paradox" of missing organizational payoffs from investments in information technology has finally been put to rest. Recent research has demonstrated a major surge in U.S. productivity between 1995 and 2000 due almost entirely to IT. While investment in IT is essential to this improvement, the key to achieving payoffs from IT investments lies in changing the nature of work processes to exploit what IT offers.

The productivity paradox began in early 1986 when economist Stephen Roach demonstrated that the huge increase in organizational expenditures on IT (computers, peripheral devices, software, and related services) between 1975 and 1985 was accompanied by virtually no gains in organizational productivity. Within weeks, Fortune magazine's cover story was about "The Puny Payoff" from computers, and the rest of the business trade press soon followed. Nobel Prize winning economist Robert Solow quipped, "We see computers everywhere except in the productivity statistics."

You can also go straight to Dr. Dale Jorgenson's home page.