Growth: Is the noun form of “grow.” It primarily refers to the process of increasing in physical size, amount, or importance. It is also used to describe progressive development, evolution, or an abnormal bodily mass like a tumor. Of course we speak about personal/psychological growth, physical growth, spiritual growth, but here we are discussing economic growth and how it actually impacts our global society. Increasing the GDP is the mantra vibrated by government leaders and think tanks purporting that as long as our particular country’s GDP is going up then everyone’s life will be materially improved. NOT! Global Gross Domestic Product (GDP) growth and standard wage growth have sharply diverged since the 1970s. While global GDP has surged roughly 13-fold since 1950, standard hourly wages for typical workers have largely stagnated. This widening gap is often referred to as the “productivity–pay gap”.
The Post-WWII Era (1950s–1970s)
In the three decades following World War II, standard wage growth and economic output tracked together closely.
- Global Output: The global economy began a period of rapid industrialization and expansion, setting the stage for exponential GDP growth.
- Wage Alignment: In the United States, for example, hourly compensation for production and nonsupervisory workers rose approximately 91% from 1948 to 1973, keeping pace with an economy-wide productivity increase of 97%.
The Great Divergence (1970s–Present)
During the mid-1970s, a structural change occurred where the historical link between overall economic growth and the median worker’s paycheck broke down, resulting in what the Economic Policy Institute documents as persistent wage stagnation.
- Global GDP: According to the World Bank, the total volume of global output has multiplied nearly fourfold since the early 1980s alone, and real Our World in Data economic aggregate measures show global average incomes per person rising at a fairly steady pace of roughly 2% annually.
- Wage Growth: Despite overall economic growth and worker efficiency gains, real wage growth for average workers has been sluggish. For instance, data indicates that from 1979 to 2019, while national productivity grew by roughly 60%, the hourly compensation of a typical worker rose only 16%.
- The Root Causes: Economists point to multiple drivers for this divergence, including the erosion of labor standards, declining union membership, globalization, and increased corporate capital share over labor share.
The ‘proof of the pudding is in the tasting’, as the saying goes and in my lifetime I have personally experienced this extreme change in wage collapse in the United States in relation to GDP. The opportunities for my four grandchildren to have the income to even dream of owning their own house or a condominium have almost completely evaporated! Beginning in the 1970’s when Nixon and Kissinger went to China and opened the door to exporting American jobs and financializing our economy, going off the Gold Standard, was the beginning, and the trend continues getting progressively worse! Capitalism is obviously great for the capitalists, but what about the other 90-95% of our global society? Barbarians at the Gates only happens when greed becomes so extreme that it pressures elements in society to force a reformation of sorts…