NEW YORK, March 1 — Persistent slow growth rates over decades can cut wages for American workers in half, Federal Reserve Chairman Jerome Powell said yesterday.
The central bank chief said the US economy faced a long-term challenge of raising productivity to boost growth, including finding ways to get more workers into the labor force.
The US economy grew at an average rate of about three per cent a year from 1991 to 2007, but since then growth has averaged just 1.6 per cent, he said in a dinner speech.
That put the brakes on wage growth, and resulted in incomes being almost 20 per cent lower than they would have been if the economy continued to grow by three per cent a year.
“From the standpoint of future Americans, if the slower growth persists for a half-century, incomes will end up roughly half of what they would have been,” Powell said.
One cause of the slow productivity gains — despite strong US business investment and historic low unemployment rates — is the relatively low rate of workers age 25-54 in the labor force, especially men, he said.
The US now has the fourth lowest participation rate for male prime-age workers of 34 advanced economies, Powell said.
This is partly driven by the growing need for higher-skill workers, and he urged steps to “create an environment in which productivity can flourish.”
“Policies that succeed in enhancing productivity growth would greatly benefit future generations,” he said. — AFP
