INTERNATIONAL COMPARISONS: The United States Is Falling Behind in Productivity and Wage Growth
One widely accepted measure of living standards is per capita gross domestic product, the total value of goods and services produced in the domestic economy per member of the population. Growth of per capita GDP is considered an essential component of rising living standards. (However, this aggregate measure takes no account of distribution, an issue addressed below.) Such growth comes from two sources: greater output per worker (i.e., higher productivity) and employment of a greater proportion of the adult population. In general, if productivity growth is strong and wages rise accordingly, families can live better without sending more workers into the workforce; if it is weak, living standards can rise only if more people work (or those working put in longer hours). Therefore, it is useful to decompose, or break down, GDP growth into these two factors. Table 8.1 does this in examining GDP growth over two periods-1979-89 and 1989-94-for the seven major industrialized countries as well as for three others (Australia, the Netherlands, and Sweden) for which comparable data are available. The weighted averages (with population shares as the weights) in this and subsequent tables omit the United States in order to provide a more direct comparison between trends in this country and those of others.