A Growing Economy Can Pay Its Bills
The expanding army of homeless, the increasing filth of our streets, tightening educational and police protection budgets, and the snowballing real price of medical care, higher education, performing arts, legal services and insurance are all inescapable realities of life. Every industrial country suffers from these symptoms to some degree, but, as in other fields, they are still a few years behind us.</br></br>What has gone wrong and what, if anything, can be done? While no single cause can account for these complex problems, one influence explains a good deal, and suggests the way out.</br></br>Productivity stagnation in the service industries has led to persistent rises in their costs. The laggard services include, most notably, health care, education, legal services, welfare programs for the poor, postal service, police protection, sanitation, repair services, the performing arts and restaurants. Their common element is the handicraft character of their production, requiring large labor inputs that are resistant to curtailment.</br></br>There are at least two reasons why rapid and persistent productivity growth has eluded these stagnant services. First, some of them are inherently hard to standardize. Before one can cure a patient or repair a broken piece of machinery, it is necessary to determine, case by case, just what is wrong, and the treatment must then be tailored to the individual case.</br></br>A second reason why it has been difficult to reduce the labor content of these services is that in many of them quality is, or is believed to be, inescapably correlated with the amount of labor expended on them. Teachers who cut down the time they spend on their classes or who increase class size, doctors who speed up the examination of patients, or a police force that spends less time on the beat, are all held to be shortchanging those whom they serve.