Question

We have discussed that country’s sustained economic growth depends mostly on rising (labor) productivity. Describe two ways how a country can increase its productivity.

Answer 1

Growth in productivity in the US and other developed economies has slowed significantly in the last decade. If this slowdown continues, it will mean a more slowly growing standard of living and more challenging fiscal challenges.

More Competition-The need to improve competition was one solution to the productivity downturn on which there was broad consensus. Competition fosters productivity growth through increased competitive opportunities and variety. When businesses have good opportunities to innovate, more technologies that improve efficiency can come into the market. However, if only the businesses with the highest productivity thrive while the least productive companies are forced to leave the sector, the average output would increase.

Better skills- Policies to improve the skills of the workforce are also important to increase productivity. measures that could not be enough to increase the years of education. more than two-thirds of young adults today will be deprived of selection for military service due to lack of employment, drug abuse, criminal records and other shortcomings, which also means they will not have the potential to be highly successful in the workforce

.Smarter R&D investment Improving investment allocation for R&D is another area that may improve long-term productivity growth prospects. The federal funding allocation for basic science research and advancement is biased towards life sciences, and is not a smart strategy