Productivity Gain Means Stagnant Living Standard

Productivity, the key factor in how fast living standards can rise, grew only modestly in 1995, dimming hopes that two decades of American income stagnation could be coming to an end.

The Labor Department reported Wednesday that productivity - output per hour of work - rose 1.1 percent last year after even more modest gains of 0.5 percent in 1994 and 0.2 percent in 1993.

For the October-December quarter, productivity actually turned negative, declining at an annual rate of 0.5 percent as overall growth slowed dramatically.

The figures for the previous years were significantly lower than earlier estimates because the government has switched to a new way of measuring output to correct for biases in computing total output, known as the gross domestic product.

Under the new measurements, productivity growth has averaged 1 percent so far in the 1990s, slightly lower than the 1.25 percent average annual gains in the 1980s.

Both decades stand far below the 3.3 percent average yearly increases in the 1960s.