Speeches by Secretary Elaine L. Chao

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Remarks as prepared

U.S. Secretary of Labor Elaine L. Chao
Opening Remarks
Joint American Enterprise Institute—U.S. Department of Labor Conference on Productivity in the 21^st Century
American Enterprise Institute
Washington, D.C.
October 23, 2002

Thank you, Chris. It’s a pleasure to co-host this conference with you and the American Enterprise Institute. I appreciate the hard work your staff has put in, together with the Department of Labor, to ensure a stimulating conference on Productivity in the 21^st Century.

We are especially pleased to have with us the Chairman of the Federal Reserve Board of Governors, Dr. Alan Greenspan, who will be speaking to us at lunch, and Dr. Glenn Hubbard, Chairman of the President’s Council of Economic Advisers.

We are also glad to have Kathleen Utgoff, Commissioner of the highly regarded Bureau of Labor Statistics. Kathleen, many thanks to you and your staff for helping us plan this conference as well.

I also want to extend my thanks to the other participants in our panels today. We appreciate your time, your expertise and your best thoughts as we tackle this vital subject.

As you know, this is the time of year when discussions about the economy are reduced to 10-second sound bites on the evening news and the slash-and-burn rhetoric of political ads.

That’s why this conference is so important. We have the opportunity to spend the next several hours thoughtfully discussing one of the most important aspects of our nation’s economy: productivity growth. We’re going to look at its driving forces, its impact and its future.

There’s a good reason why we are devoting an entire conference to this subject. Productivity growth is critical to maintaining and increasing the standard of living for American workers.

That’s particularly important to me as the Secretary of Labor. The Department’s data show that real wage gains closely track productivity growth. Since 1947, both real hourly compensation and productivity have tripled.

Higher wages are not the only benefit that workers reap from productivity growth. Higher productivity means lower production costs, which translates into lower consumer prices for many goods and services.

The productivity growth we experienced over the last seven years is one reason why our economy has confounded the experts, expanding rapidly without the usual accompanying increases in inflation.

We know that productivity is crucial to our economic vitality and plays a key role in raising living standards for all Americans.

But there are many things about productivity that are still the subject of study and debate. That’s why we’ve convened this conference.

For example, we don’t fully understand all the factors that drive productivity. So our first panel will examine whether recent productivity gains can accurately be characterized as a “miracle.” If so, what caused these gains and what impact have they had on our economy?

Second, we need to explore the relationship between productivity growth and jobs. For years, some have argued that productivity growth comes at the expense of workers. But the last decade has turned that line of thinking on its head.

Throughout the 1990s, we saw productivity growth at the same time that national unemployment rates fell to their lowest levels in a generation. Even today, as productivity continues to increase, unemployment levels remain far lower than in previous economic downturns.

So we need to have a better understanding of the complex relationship between productivity and jobs.

Finally, we want to get a feel for the road ahead. Our third panel will discuss the prospects for productivity growth in the future.

They’ll also look at another important issue that holds particular interest for me—the impact of productivity on worker safety. Productivity does not have to come at the expense of a safe workplace. In fact, many companies have shown that a safe workplace improves productivity. I look forward to hearing our panelists’ views on this subject.

If productivity growth is a key ingredient of economic recovery, then there are encouraging signs. Despite the recent slowdown, productivity growth has held up well since the latter part of 2000.

In the 5 quarters since the business cycle peaked in 2001, productivity has risen at an annualized rate of 3.8 percent—stronger than any other downturn since 1969.

In fact, between 1995 and 2000, productivity grew by 2.5 percent a year. Compare that to an annual growth rate of just 1.4 percent between 1973 and 1995.

These are not statistical anomalies. They demonstrate solid productivity growth for the past seven years.

Many people point to technology as a productivity driver. Just as important is the effective use of technology to increase efficiency in everything from manufacturing processes to inventory management. In fact, a report being issued by BLS today shows just how widespread technology has become in the workplace.More than half of all Americans now use a computer on the job.

Sound monetary policy has almost certainly played a role in productivity growth.

Another important factor can be summed up in an expression that we use a lot at the Department of Labor: the “21^st Century Workforce.”

By that phrase, I mean a workforce that is flexible, skilled and diverse enough to respond to the needs of a rapidly changing economy.

It’s not surprising that today’s highly productive workforce is led by the “Baby Boom” generation—the most highly educated generation of workers in our history.

In just the last 20 years, the number of workers with college degrees has more than doubled. Today, nearly a third of American workers have a Bachelor’s Degree or higher. And more women and minorities than ever before have entered the workforce, opening up opportunities for segments of the population whose talents and skills have been underutilized.

It’s important for us to look at the connection between productivity growth and these dramatic changes in our workforce. And we need to ask the question: can we stimulate productivity further by investing in human capital through training and education?

These are major issues to consider.Our answers to them could help determine our nation’s future prosperity.

America’s immensely productive economy has given us many things:

• the highest standard of living in the world,
• a flexible and resilient economy, and
• a broad competitive advantage that no other nation can match.

Clearly, productivity is an important issue and it’s time to place it squarely in the forefront of public policy debate. We have assembled a first-rate group of experts from academia, business, government and public policy organizations to discuss all aspects of this issue. I look forward, as I know all of you do, to hearing their views. So let’s begin. Thank you.

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