TAKEAWAYSProductivity is the key to achieving long-run economic growth and wage gains. It measures how effectively an economy uses a given amount of capital and labor.
In general, U.S. productivity gains have slowed in recent decades.
There are competing economic theories about why U.S. productivity growth has slowed and whether this shift is permanent.
These theories run the gamut from a misallocation of workers to fewer new business starts to flagging public investment to a slowdown in new technology to the rise of income inequality.
Each explanation leads to different policy solutions.