Reading Comprehension

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 decline 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.


Which of the following, if true, would most weaken the budget-deficit explanation mentioned in the highlighted text for the discrepancy mentioned in the highlighted?

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 dose 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.

The causality stated is as follows. Increased deficit -----> Increased interests -----------> Decreased technology investment

If we break the link then this will be weakened.

A. Research shows that the federal budget deficit has traditionally caused service companies to invest less money in research and development of new technologies. - Irrelevant doesn't explain if the deficit was more or less
B. New technologies have been shown to play a significant role in companies that have been able to increase their service productivity. - Irrelevant
C. In both the service sector and manufacturing, productivity improvements are concentrated in gains in quality. - Irrelevant
D. The service sector typically requires larger investments in new technology in order to maintain productivity growth than dose manufacturing. - Irrelevant comparison
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. - I don't understand how the effect on manufacturing is relevant with service. The last para only talks about services industry.

Hi,

You need to look at the entire passage in order to be able to answer any question as it would put the highlighted parts in context. Just to summarise, let's consider the below points:

1. Economic growth in the US has been sluggish
2. Manufacturing employs only 19.1% American workers whereas services employ 70% of the American workers
3. Productivity has grown in the manufacturing sector whereas it has shown a decline in services
4. Several possible arguments to showcase why manufacturing has shown an improvement in productivity whereas despite growth, services has shown a productivity decline
5. The author now talks about another possible reason why manufacturing is growing whereas services has stagnated
i. Argument by proponents: lower federal budget deficit -> lower interest rate -> higher investment in development of new technologies -> higher growth in services sector
ii. Service-sector managers who implement available technology , choose skillful workers can improve their companys' productivity
iii. Culprits of service sector stagnation: corporate takeovers and unnecessary governmental regulation

While you have not highlighted the part which the question is referring to, I am assuming it is the one mentioned in Premise 5 (i) with the linkage between federal budget deficit and investment in technology for service sector.

Now, looking at the options:

A. This option ends up strengthening the explanation given by the proponent of the federal budget deficit theory. INCORRECT
B. This again strengthens the argument as it implies that new technology, which is currently being hindered by the federal budget deficit, can actually improve the productivity in service sector companies. INCORRECT
C. This is not in context to the highlighted text. The highlighted text is about whether a particular economic policy can improve productivity in the service sector. This option gives more details about what the productivity improvements will end up impacting. INCORRECT
D. An option which strengthen the relationship in the highlighted text. It highlights the difference between service and manufacturing implying higher investment in technology for service which is being hindered by the federal budget deficit. INCORRECT
E. The passage at multiple points mentions that it is trying to find the root cause for why manufacturing industry productivity is registering a growth while the service industry productivity is declining. For a reason to be valid it should impact the service industry more than it does manufacturing. This option attacks that gap showcasing that the high interest rates impact both the industries equally and this cannot be looked at as a cause for sluggish service sector productivity alone. CORRECT

Thus, the answer is E.