Average growth in output per hour in non-farm business was only a little over 1 percent between 1973 and 1995. In the last three years, however, productivity growth has accelerated, reaching an astonishing 4 percent growth in the last two quarters. The growth in productivity has enabled business to pay higher wages without raising prices significantly or eroding profits severely. That's another one of those silly questions to which no one can honestly claim to know the answer. Hypotheses abound about why productivity growth might have accelerated in the mid 1990s.
Technology clearly has something to do with it.
Although the telecommunications and information management revolution did not start in the 1990s, it may have been just at the right point by then to offer firms that are facing strong demand and tight labor markets a way to increase their efficiency. One factor is the availability of new technology, especially computers and telecommunications technology. The other factor is the revolution in management attitudes and practices that has occurred since the 1980s. A whole generation of managers has been trained to think continuously about productivity and quality management. Buzzwords like reengineering and restructuring have not only gotten into the vocabulary of managers, but they have also infiltrated their thought processes and affected their behavior.