Principles of Economics- Mankiw (5th) 397

Principles of Economics- Mankiw (5th) 397 - CHAPTER 18 T H...

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CHAPTER 18 THE MARKETS FOR THE FACTORS OF PRODUCTION 409 Table 18-2 also shows that, beginning around 1973, growth in productivity slowed from 2.9 to 1.1 percent per year. This 1.8 percentage-point slowdown in productivity coincided with a slowdown in wage growth of 1.9 percentage points. Because of this productivity slowdown, workers in the 1980s and 1990s did not experience the same rapid growth in living standards that their parents enjoyed. A slowdown of 1.8 percentage points might not seem large, but accu- mulated over many years, even a small change in a growth rate is significant. If productivity and wages had grown at the same rate since 1973 as they did pre- viously, workers’ earnings would now be about 50 percent higher than they are. The link between productivity and wages also sheds light on international experience. Table 18-3 presents some data on productivity growth and wage growth for a representative group of countries, ranked in order of their produc- tivity growth. Although these international data are far from precise, a close link
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