1. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2Living Standards and Labor Productivity Growth  Explain why there is such a large difference among countries in the standard of living.  Evaluate the record of U.S. labor productivity growth, and explain why even small differences in growth rates are important. Objectives

2. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2Living Standards and Labor Productivity Growth  industrial market countries  developing countries  Group of Seven (G-7) Key Terms

3. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 3 Standard of Living There are vast differences in the standards of living among countries. For example, per capita output in the United States is more than 50 times that of the world’s poorest countries. You might say that poor countries are poor because they experience low labor productivity.

4. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 4 Industrial and Developing Economies Industrial market countries are the advanced market economies of Western Europe, North America, Australia, New Zealand, and Japan; also called developed countries. Developing countries are countries with a lower standard of living because they have relatively little human and physical capital.

5. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 5 Education and Economic Development Quality of labor Education Literacy

6. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 6 Group of Seven (G-7) The seven leading industrial market economies, including the United States, United Kingdom, France, Germany, Italy, Japan, and Canada are called the Group of Seven (G-7).

7. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 7 Average Years of Education of Working-Age Populations in 1970 and 2002 Figure 12.2

8. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 8 U.S. Labor Productivity and Output Per Capita Record over the long run Slowdown and rebound in productivity growth Output per capita International comparisons

9. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 9 Long-Term Trend in U.S. Labor Productivity Growth: Annual Average by Decade Figure 12.3

10. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 10 U.S. Labor Productivity Growth Figure 12.4

11. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 11 U.S. Real GDP Per Capita Since 1959 Figure 12.5

12. CONTEMPORARY ECONOMICS© Thomson South-Western 12.2 Living Standards and Labor Productivity Growth SLIDE 12 U.S. GDP Per Capita in 2004 as Compared to Other Major Economies Figure 12.6