A recent research note from J.P. Morgan Chase theorized that one of the reasons U.S. productivity growth has stalled is at least partly because the American workforce as a whole is simply less skilled than it used to be.
On Friday, the Labor Department announced that labor productivity rose by just 0.9% in the second quarter of this year, after falling 1.7% in the first quarter. These numbers aren't an anomaly: According to a report issued last week by JPMorgan Chase economists Michael Feroli and Robert Mellman, worker productivity has only grown at an annual rate of 0.7% in the past three years, after averaging 2.9% growth from 1995 to 2005.
Wall Street Journal staffer Anna Louie Sussman taps into the J.P. Morgan Chase findings, noting that growth in "labor quality," a benchmark for skills among average workers, is trending downward. According to Sussman "Well-educated baby boomers are retiring, and many laid-off older Americans who want to work have struggled to find jobs following the recession, bringing the overall experience level of the workforce down. College enrollment is on the decline after peaking in 2011, as the economic expansion creates job opportunities for less-skilled workers."
"That may not sound like a big deal, but with trend growth as low as it is, every basis point counts," Mr. Feroli said. "Moreover, there are good reasons to think the recently subdued growth in labor quality is likely to persist. An encouraging pop up in college enrollment during the Great Recession soon fizzled out as the labor market improved. And the passing from the scene of the baby boom generation is leaving behind a less experienced workforce."
Mr. Feroli said there was one obvious policy solution: more skills and more education. But, he said, "The question is, how do you do that in a way that's actually effective?"
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