If its output per worker continues to grow, America could soon find itself in an unusual position -- setting the productivity pace among the world's largest industrialized nations.
The prospect of the United States, which has experienced sluggish productivity growth for a decade, eclipsing the Japanese in this area is startling. The productivity of Japanese workers in key export sectors like automobiles is legendary. But what is less well-known is that Japanese productivity is uneven. Japan's great export industries are world leaders, but manufacturing sectors that produce for its de facto closed domestic market are surprisingly inefficient; many estimates put Japan's total productivity -- even in manufacturing -- at 10 to 20 percent below that of the United States. Where Japan really underperforms, however, is in services. Government regulations that limit competition have sustained an old-fashioned service sector. Because of low service productivity, total output per worker in Japan is only about 70 percent of the level in America. Checking out. This gap may grow wider over the next decade. Consider the most prosaic example of the new productivity revolution, the checkout counters of big American supermarkets. Part of the productivity gain is upfront: Clerks move rapidly to sweep the bar code on each package across a laser reader. Even more important are the hidden gains: The record of purchases goes straight into computers that manage inventory and eliminate tedious work. Japan's retail sector, in contrast, with many tiny mom-and-pop stores, cannot take full advantage of this technology without a wrenching restructuring.
Similar stories can be told about office productivity. Japanese offices, for example, are not as computerized as are their American counterparts; computers are on only about one third of Japanese desks, versus 75 percent in this country. This is partly because protected markets have forced the Japanese to use inferior PCs. Japan's traditional management style has also led to continued reliance on verbal and handwritten communication. As a result, it will be harder for Japan to benefit fully from PC networks and electronic mail.
Mixed bag. Europe is more of a mixed bag than Japan. France, for example, shares some of the Japanese characteristics -- such as a plethora of small stores protected by government regulation. Germany's service sector is also cramped by regulation, which affects everything from hiring and firing to opening and closing times, although services seem fairly efficient. Great Britain, famous for productivity problems in manufacturing, has a surprisingly modern retail sector and leads Europe in services like banking and finance. Overall, however, Europe's labor market and service sector are relatively inflexible and overregulated, a partial explanation for why unemployment in Europe is so high. The productivity boom in America will ultimately cross the Atlantic, but it will probably take a few years to reach European shores.
The American economy is different from those of other industrial nations -- more freewheeling, more chaotic, far more brutal to those who are less talented or lucky. Over the past few years, analysts have tended to focus on what's wrong with this kind of economy. But the current productivity surge in the United States is a reminder that our system has its virtues, too.
Originally published, 3.29.93