Whereas United States Economic Productivity Grew at an Annual Rate of 3 percent from 1945 to 1965

Reading Passage Question

(This passage is excerpted from material published in 1997)

Whereas United States economic productivity grew at an annual rate of 3 percent from 1945 to 1965, it has grown at an annual rate of only about 1 percent since the early 1970’s. What might be preventing higher productivity growth? Clearly, the manufacturing sector of the economy cannot be blamed. Since 1980, productivity improvements in manufacturing have moved the United States from a position of acute decline in manufacturing to one of world prominence. Manufacturing, however, constitutes a relatively small proportion of the economy. In 1992, goods-producing businesses employed only 19.1 percent of American workers, whereas service-producing businesses employed 70 percent. Although the service sector has grown since the late 1970’s, its productivity growth has declined. Several explanations have been offered for this declined and for the discrepancy in productivity growth between the manufacturing and service sectors. One is that traditional measures fail to reflect service-sector productivity growth because it has been concentrated in improved quality of services. Yet traditional measures of manufacturing productivity have shown significant increases despite the under measurement of quality, whereas service productivity has continued to stagnate. Others argue that since the 1970’s, manufacturing workers, faced with strong foreign competition, have learned to work more efficiently in order to keep their jobs in the United States, but service workers, who are typically under less global competitive pressure, have not. However, the pressure on manufacturing workers in the United States to work more efficiently has generally been overstated, often for political reasons. In fact, while some manufacturing jobs have been lost due to foreign competition, many more have been lost simply because of slow growth in demand for manufactured goods.

Yet another explanation blames the federal budget deficit: if it were lower, interest rates would be lower too, thereby increasing investment in the development of new technologies, which would spur productivity growth in the service sector. There is, however, no dearth of technological resources, rather, managers in the service sector fail to take advantage of widely available skills and machines. High productivity growth levels attained by leading edge service companies indicate that service sector managers who wisely implement available technology and choose skillful workers can significantly improve their companies’ productivity. The culprits for service-sector productivity stagnation are the forces such as corporate takeovers and unnecessary governmental regulation that distract managers from the task of making optimal use of available resources.

“Whereas United States Economic Productivity Grew at an Annual Rate of 3 percent from 1945 to 1965” - is a GMAT reading comprehension passage with answers. Candidates need a strong knowledge of English GMAT reading comprehension.

This GMAT Reading Comprehension consists of 4 comprehension questions. The GMAT Reading Comprehension questions are designed for the purpose of testing candidates’ abilities in understanding, analyzing, and applying information or concepts. Candidates can actively prepare with the help of GMAT Reading Comprehension Practice Questions.

Solution and Explanation

1. Which of the following, if true, would most weaken the budget-deficit explanation for the discrepancy mentioned in line 57?

(A) Research shows that the federal budget deficit has traditionally caused service companies to invest less money in research and development of new technologies
(B) New technologies have been shown to play a significant role in companies that have been able to increase their service productivity
(C) In both the service sector and manufacturing, productivity improvements are concentrated in gains in quality
(D) The service sector typically requires larger investments in new technology in order to maintain productivity growth than those of manufacturing
(E) High interest rates tend to slow the growth of manufacturing productivity as much as they slow the growth of service-sector productivity in the United States

2. The passage states which of the following about the effect of foreign competition on the American manufacturing sector since the 1970’s?

(A)It has often been exaggerated.
(B)It has not been a direct cause of job loss.
(C)It has in large part been responsible for the subsequent slowing of productivity growth.
(D)It has slowed growth in the demand for manufactured goods in the United States.
(E)It has been responsible for the majority of American jobs lost in manufacturing.

3. It can be inferred from the passage that which of the following was true of the United States manufacturing sector in the years immediately prior to 1980?

(A)It was performing relatively poorly.
(B)It was in a position of world prominence.
(C)It was increasing its productivity at an annual rate of 3 percent.
(D)It was increasing its productivity at an annual rate of 1 percent.
(E)Its level of productivity was higher than afterward.

4. The author of the passage would be most likely to agree with which of the following statements about productivity improvements in United States service companies?

(A) Such improvements would be largely attributable to efficiencies resulting from corporate takeovers.
(B) Such improvements would depend more on wise implementation of technology than on managers' choice of skilled workers.
(C) Such improvements would be more easily accomplished if there were fewer governmental regulations of the service sector.
(D) Such improvements would require companies to invest heavily in the development of new technologies.
(E) Such improvements would be attributable primarily to companies' facing global competitive pressure.

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