As the American economy continues to boom, and companies continue to expand, all this growth is starting to benefit the worker. It was recently reported that there is a record high 7.1 million job opening across America. This is more jobs than those who report being unemployed. Employers are strained to find more employees, giving way to the greatest wage hike since 2009.
When employers are trying to grow their business, that is uniformly a good thing for the economy. However, The economy does not necessarily benefit all the members of society equally. Economic growth is great on the whole, and the country as a whole will prosper. However, a country is made up of a multitude of parts.
GDP growth is not a direct indicator of a GDP per capita. For example, China has the second largest economy in the world. However, they also have over one billion citizens, more than three times that of the United States. Thus, even if the United States and Chinese economies were the same size, which they are not, the U.S. GDP per capita would still be more than three times greater.
GDP per capita is important when trying to gauge standard of living. However, this metric is still imperfect. GDP per capita is simply the total GDP divided by the number of citizens, and thus an average economic value per person. This does not take into account how the average could be widely misleading.
There may be a select elite class of citizens that accumulate an overwhelming quantity of the economic benefits from a thriving GDP. These people would bring up the average substantially, and thus giving a false indicator of what the average person’s experience is really like. This is how it will go with all averages that attempt to describe the whole of a nation in one metric.
Real indicators of what the quality of life is like for the common folk require a more precise approach. Slicing off the wealthiest top ten percent and then taking an average is one idea. Singling out employees and not including employers is another. There are many conceivable methods to try and gauge what the common standard of living is for the people of a nation.
One great indicator as to how things are trending for the common folk is wages. If the economy is growing, are wages increasing? If not, then employers are likely gaining at the behest of employees.
In the case of the American economy of 2018, this is not the case. For wages are increasing at a rate not seen since 2009. “Labor Department’s monthly jobs report showed that the typical worker’s earnings rose by 3.1 percent in the past year — the biggest such leap since 2009,” Washington Post reports.
Wage growth typically drags behind economic growth as employers are forced to begin competing with each other for labor. This competition drives up wages, and thus the standard of living for the common folk. Thus, this is likely only the beginning of wage increases if the trend holds steady.
The American economy is booming. But perhaps more importantly, Americans are thriving. Wage growth is a great indicator of that reality.