ABSTRACT
This chapter looks at changes in productivity among American workers and ask where productivity gains went. Productivity is an imprecise concept that yields considerable disagreement among economists, sociologists, and policy analysts. In general terms, productivity is the relative rate at which inputs into a production system turn into outputs. In a market economy, productivity is very important--increases in productivity increase aggregate wealth and income in the economy as a whole. Productivity in economics reflects a technical relationship between outputs and inputs in a production system or process. Productivity is not strictly associated with increased output or work effort in fact, some very labor-intensive processes are not very productive, and some processes that seem to require little effort are very productive. Radically oriented economists and social scientists would argue that wages should rise in direct proportion to productivity. Regular, steady productivity gains ease negotiations between managers and workers: since the pie is getting bigger, everyone can have a slice.
