[Joseph_E._Stiglitz,_Carl_E._Walsh]_Economics(Bookos.org) (1)

3.5
3.0
3.12
2.66
PERCENT
2.5
2.0
1.5
2.20
2.12
1.88
1.0
0.5
0.0
1960–1969
1970–1979 1980–1989 1990–1999 1995–2000
Figure 27.1
PER CAPITA OUTPUT GROWTH
The growth rate of total output per capita declined over the 1970s, 1980s, and the early
1990s. It rose again in the late 1990s.
SOURCE: Economic Report of the President (2004).
Output per hour (Y/H ) is what we identified in Chapter 22 as labor productivity.
Hours per person (H/N ) reflects both the average number of hours people work and
the labor force participation rate. The labor force participation rate is the fraction
of the population that is actually in the labor force. For income per capita to
rise, either labor productivity must rise or the number of hours worked must grow
faster than the population.
In many countries, rapid growth in income per capita follows increases in labor
force participation. For example, a customary restriction on women’s engaging in
work outside the home may be loosened. Thus the United States did experience
growth in labor force participation, particularly during the 1970s and 1980s, as
women entered the labor force in ever greater numbers. The only other way to
increase hours per person is to raise the average hours worked—that is, individuals
must work longer and sacrifice leisure. For developed economies such as the United
States’, the key to improving living standards lies in the other element in the
equation: growth in labor productivity.
The roles of labor productivity and of hours worked in accounting for economic
growth in the United States are shown in Figure 27.2, which expresses the growth
rate of total output as the sum of the two factors:
growth rate of output = growth rate of output per hour +
growth rate of hours worked.
RISING STANDARDS OF LIVING ∂ 587