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There is ample evidence that in the past 17 years annual gains in productivity in the United States have lagged behind those of other advanced industrialized countries. Between 1960 and 1977, the U.S. could boast productivity increases of only 2.8 percent per year, compared with 5.7 percent for West Germany and 8.4 percent for Japan (Fig. 1). However, it should also be emphasized that the absolute productivity level in the U.S. is still high compared with other countries, even though the rate of improvement may be lower.