The year 1973 marked a divide in the postwar economy.1 During the 25 years between 1948 and 1973, private sector productivity increased at an annual rate of 2.9%. Productivity improvement after 1973 fell way below this long-term trend, leveling off at about 0.6% a year until 1981 and rising to only 1.6% a year between 1981 and 1987. A similar pattern is reflected in the real wages of the workforce.2The conventional interpretation of this difference in the U.S. economy before and after 1973 is that it reflects the combined influence of the OPEC oil shock and the influx into the labor market of inexperienced workers born in the postwar baby boom, possibly reinforced by growth in regulatory costs.3 However, when the productivity data are analyzed in a growth accounting framework, these economic factors can only account for about two thirds of the productivity decline.4 What then explains the balance of the shortfall in productivity? Many analysts have pointed to the intangible effects on managers of increased economic uncertainty since 1973—growing business cautiousness, increased emphasis on short-term financial objectives, and inadequate entrepreneurial incentives.5 But economic change and uncertainty can also affect productivity through their impact on jobs and workers.