Productivity Is Slowing and Inequality Is Growing. Here’s What’s Causing it.

Jason Furman in Evonomics:

ScreenHunter_2096 Jul. 16 20.29Productivity growth—a necessary (though not sufficient) condition for rising incomes in the long run—has slowed since 1973, growing at a 1.8 percent annual rate, as compared to a 2.8 percent annual rate in the 25 years prior to 1973. At the same time, inequality in the United States is higher and, in recent decades, has risen faster than in other major advanced economies. In 2014, the top 1 percent captured 18 percent of income, up from 8 percent in 1973. These two major trends have been the major causes of the slowdown in income growth for the median household.

These dual trends—that is, the slowdown in productivity growth and the increase in inequality in recent decades—have many distinct sources, but insofar as they have some causes in common, there is the potential to address these causes in ways that simultaneously improve efficiency and equity. To this end, the evidence that a rise in rents is contributing to both phenomena is important.

More here.