Sudden breakthrough: why the US has overtaken the rest of the world in productivity
In recent years, the United States has demonstrated the highest rates of labor productivity growth among developed countries, which looks unexpected against the background of the long crisis in previous decades. Moreover, the United States has moved closer to the level of the most progressive developing countries. About why labor productivity in America is booming, what artificial intelligence has to do with it, why productivity is falling in Europe, and how things are going with this important indicator in Russia, see the Izvestia article.
A sudden breakthrough
The welfare of any state in the long term is determined by the only fundamental indicator — labor productivity. The ability to produce more goods and services in one hour of work makes it possible to raise wages without accelerating inflation and maintain long-term economic growth. Since the pandemic, the United States has been showing signs of a technological renaissance. At the same time, a significant part of Asia and the EU countries are stagnating or growing very sluggishly.
To understand the scale of the current breakthrough in the United States, a comparison with previous decades is needed. From the mid-2000s until the outbreak of the pandemic, the American economy was in what renowned economist Robert Gordon called the era of declining innovation. In his work "The Rise and Fall of American Growth" (2015), he argued that the potential of the great inventions of the past (electricity, the internal combustion engine) has been exhausted, and digital technologies are only changing the ways of leisure, without affecting the overall efficiency of production. Statistics from that period confirmed his thesis: productivity growth in the United States slowed from a historic 2-2.5% to an anemic 1% per year.
The situation began to change in the early 2020s. The average annual productivity growth over the past five years (excluding agriculture) has been fixed at 2.1%, which is twice as high as in the 2010s.
The reasons for this acceleration are not so much revolutionary as adaptive. First, there was a belated diffusion of technologies from the previous decade. Cloud computing, smartphones, and video communication systems, which Gordon considered unimportant, were finally integrated into basic business processes in the face of pandemic shocks and subsequent staff shortages. The main contributors to the growth were the information sector (5.4% annual productivity growth) and the management and professional services sector (over 4.5%). Over the past three years, white-collar workers in the United States have learned to do the same amount of analytical and administrative work with fewer forces.
Secondly, the energy factor played a critical role. Thanks to shale production and the development of gas liquefaction infrastructure, the American industry is operating in an abundance of cheap energy. The cost of electricity for businesses in the United States is on average two times lower than in Europe, and 30-40% less than in Japan. This makes it possible to automate energy-intensive processes where competitors are forced to save on each kilowatt.
Thirdly, the flexibility of the labor market is important. Unlike European countries, which saved jobs in inefficient sectors through subsidies, the United States instead allowed a massive personnel shake-up during the pandemic, distributing money directly. This led to a shift of people from stagnant industries to more productive companies, which recovered hiring faster than others.
Near zero
Nothing like this can be seen on the eastern shore of the Atlantic: the eurozone is by no means efficient. In Germany, the industrial locomotive of the European Union, productivity growth has been hovering around zero over the past three years. In the 2010s, the German model relied on cheap pipeline gas and globalization. After the severance of ties with Russia and the outbreak of war in the Middle East in early 2026, the cost of basic resources for German factories increased many times.
European industry finds itself in a situation where investments are directed not at improving efficiency, but at physical survival and adaptation to energy scarcity. In France, productivity growth after 2020 has completely gone into negative territory (about -0.2%), which analysts attribute to government regulation that prevents the natural rotation of personnel. The UK is showing sluggish growth of 0.4%, suffering from chronic underinvestment in fixed assets after leaving the EU.
As a result, Europe has gradually turned into a region where high energy costs and environmental taxes are eating up all the benefits of digitalization. The productivity problem that emerged in the region back in the 2010s has only worsened this decade.
In addition to the geopolitical upheavals, it is impossible not to note the weakness of the EU in terms of stimulating development. As they said until recently, America produces innovations, China copies and implements them, and Europe regulates them. The second part of this maxim is now raising questions, given China's great success in advanced technology, but the third has perhaps become even more prominent. Without a review of its strategy, Europe will have a hard time.
Automation as a way of survival
In Asia, productivity dynamics are dictated not so much by technological leadership as by the demographic crisis. In Japan, efficiency growth accelerated to 1.4% (compared to 0.8% in the last decade). But this is caused not so much by a scientific and technological breakthrough as by the physical absence of workers. Faced with the inability to hire staff, Japanese retail and service industries have massively introduced self-service systems and robotics. The shortage of personnel has forced businesses to automate even those niches that were previously considered traditional for manual labor.
China has entered a period of gradual deceleration. The era when productivity grew by 6.5% per year due to urbanization and infrastructure construction is over. In 2024-2025, the growth rate of output dropped to 4.0–4.5%, which, however, is very good even for a country with catching-up development and an average level of GDP per capita. China is trying to switch to "new productive forces" (electric vehicles, lithium batteries), but the debt crisis in the construction sector and limited access to Western lithographic technologies create difficulties along the way. At the same time, China is trying to keep up with its neighbors in terms of automation. There are more industrial robots installed in China than in the rest of the world combined, and the country is second only to South Korea and Singapore in terms of their number per 10,000 workers.
India remains a rare exception among large economies, growing productivity at a rate of about 5.9%. This is where the "low start" effect and massive government investments in digital infrastructure and roads work, which gives quick returns nationwide.
Growth at capacity limit
In the period 2024-2026, Russia demonstrates specific productivity dynamics due to structural transformation. Official statistics show a surge in output in the manufacturing industry at the level of 3.2–3.8% versus 1-2% in previous years.
This result is the result of a combination of several factors. On the one hand, the critical shortage of personnel (unemployment at 2%) forces enterprises to maximize the work of the remaining employees and invest in automating those processes where cheap labor was previously used. On the other hand, the state defense order ensures full capacity utilization and guaranteed sales, which always leads to a statistical increase in production in short periods.
However, this growth has a limit. The April monitoring by the Bank of Russia recorded a sharp decline in investment activity in the first quarter of 2026. Uncertainty and high cost of borrowed capital lead to the freezing of modernization programs. Without updating the machine tool fleet and access to advanced technologies, the current surge in productivity in the Russian Federation risks stagnation due to physical wear and tear of equipment.
Fluctuation or trend
The main question facing economists today is whether the current American success is a sustainable trend, or is it a temporary spike caused by a unique combination of cheap energy and a post—pandemic rebound?
There is a possibility that we are witnessing only the first phase of the impact of artificial intelligence on macroeconomics. If in 2020-2024 growth was ensured by the introduction of technologies from a decade ago, then the real effect of the introduction of generative models and autonomous AI agents will begin to manifest itself in statistics only by 2027-2030. In this scenario, the United States and China may consolidate their leadership, while countries with expensive energy (Europe) will continue to lag behind, as AI infrastructure requires huge amounts of electricity.
However, obstacles cannot be ignored either. Trade wars, massive tariffs, and fragmentation of global supply chains work as a tax on efficiency. If the world finally breaks up into isolated technological blocks, the overall productivity of the planetary economy will inevitably decrease, as companies will have to duplicate production and use less efficient local suppliers, as well as build up large reserves.
Don't forget that, for all its successes, America is still far from making a breakthrough in the industries that produce physical products. In some of them, for example, in industrial production, the productivity situation even worsened in the 2020s, and there was a decline. Very weak growth, at the level of statistical infallibility, is also recorded in construction.
In fact, we can talk about the end of the era of universal growth. The world is divided into those who can convert energy and algorithms into real production, and those who pay for geopolitical instability and legislative barriers by degrading their industrial base. In this race of technologies and resources, the advantage is now on the side of the United States and China, but maintaining this gap will require Washington's ability to maintain the investment cycle in the face of growing public debt and social imbalances, and China's ability to solve the demographic crisis and overcome the backlog of the most advanced solutions. As for Russia, there is no way to do without creating a truly innovative orientation in the economy, including the most careful regulation of all high-tech industries.
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