Blog Post

AEIdeas

US productivity has grown by only 1% annually since the mid-2000s, and half that since the Great Recession and Financial Crisis. With demographics dragging on labor force growth, the US economy needs faster productivity growth if it has any hope of even being a 2% economy over the long-term, much less the 3% to 4% economy that the Trump administration talks about.

And on this topic, I highly recommend the latest issue of International Economy magazine, which surveys a number of economists about the productivity problem in advanced economies. Lots of interesting theories and possible policy approaches. I will explore some of these in future blog posts, but for now here is something from Robert Litan:

Second, encouraging entrepreneurship is key because entrepreneurs, especially those who commercialize disruptive innovations and who later build large companies, enhance productivity growth. Think of the key technologies that have brought us the modern age—the telegraph, telephone, television, computer software and hardware, internet search, and air conditioning. All were introduced by entrepreneurs. The lowest-cost way to induce more startups, which has been flagging since the Great Recession, is to let in more immigrant entrepreneurs. I know any immigration reform is a political minefield, but the data are clear: immigrants are much more likely to launch businesses, especially tech businesses, than native-born Americans. So after letting the “Dreamers” stay here (what a waste, beyond cruelty, to make them leave!), immigrants with an entrepreneurial record, especially those who have already helped launch a business in the United States, should go to the head of line for permanent green cards, and ultimately citizenship.

And as it happens, the good folks at the Center for American Entrepreneurship recently released a study on this very issue. It is full of great charts, including this rather compelling one: