This diagram displays the rapid growth in per person production since the end of World War 2.  To understand the sources of this improvement over time, it’s useful to do a little math. 

• Per Capita RGDP = RGDP/Population
  • Hours Worked/Hours Worked = 1
  • And so, we can multiply Per Capita RGDP by this term without affecting it…
  • RGDP/Population = RGDP/Population X Hours Worked/Hours Worked
  • Rearranging our terms…
• Per Capita RGDP = RGDP/Hours Worked X Hours Worked/Population

And so, there are two possible explanations for the rise in the US standard of living over the past 90 years:

Productivity – RGDP/Hours Worked is the same as output per hour.  What allows a country to get more output from an hour spent working?  Greater availability of capital and natural resources certainly.  But the United States has always been abundant in both.  Instead, the primary source of economic growth for the United States has been improvements in technology.  Technology in this case includes everything from aeronautics, to computing, to better management techniques.

Labor Participation – Hours Worked/Population measures the proportion of the population actively employed.  A significant factor in the large increase in per capita RGDP over the past 90 years was the entry of more women into the workforce during world war 2 and continuing thereafter.   Likewise, a significant decline in labor force participation, say due to the impending retirement of baby boomers, could have the opposite effect.