The Nation - Selected Editorial

Doug Henwood dhenwood at
Mon Jul 20 07:37:58 PDT 1998

Fellows, Jeffrey wrote:

>Is there any research that examines or posits a minimum (for social
>stability) long-term productivity growth rate? I have problems believing
>the 1% rate used by the SSA, especially since a 2% rate may aleviate
>most, if not all, of the shortfall problem. Also, it seems that a
>significant proportion (perhaps 30%) of the hypothesized 1% growth rate
>would be eaten up by changes in the age composition of the US

Assuming both a low productivity growth rate and a low labor force growth rate, which is how the Social Security administration justifies its low GDP growth rate projections, is at odds with the evidence. At least the evidence marshalled by Cutler, Poterba, Sheiner, and Summers in Brookings Papers 1 (1990), which argues that population and productivity growth are negatively correlated. (Contrast the lower pop growth/higher prod growth of Japan and Western Europe with the higher pop growth/lower produ growth of the US.) When I pointed this out to the SS administration's chief actuary, he said he'd never heard the argument before and asked for the cite. I gave it to him, but it seems not to have altered the projections, Especially interesting, since one of the authors, Summers, is a bigwig in the Clinton administration.


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