World Development Report 1984

TABLE 2.2
Rates of growth in the real product wage and in labor productivity for the
manufacturing sector and the aggregate economy, by country, 1962-78
(average aninual percentage c/lange)
Sector, mcasure, Germnany. United Uinited
and period Canada France Fed. Rep. Italy Japan Kingdoin States
Manufacturing
Real product wage
1962-69 5.0 4.8 5.6 7.4 10.8 4.6 3.4
1969-73 3.6 7.0 7.5 9.7 12.6 5.6 3.6
1973-75 0.1 6.2 6.8 4.4 0.6 4.6 0.1
1975-78 . 4.8 5.4 2.0 8.9 -1.4 3.0
Labor productivity
1962-69 4.5 6.3 5.9 6.8 11.2 4.5 3.1
1969-73 4.4 5.4 4.8 6.9 8.7 4.1 3.2
1973-75 -0.4 2.8 5.2 0.4 -1.8 -1.3 -0.3
1975-78 4.5 6.1 5.0 4.1 7.3 1.2 3.0
Aggregate economy
Real product wage
1962-69 3.6 5.1 5.0 7.8 8.5 3.2 3.1
1969-73 2.0 5.5 6.3 7.9 12.2 3.7 2.6
1973-75 1.5 5.1 4.8 6.0 8.6 4.9 0.2
1975-78 1.8 5.2 2.7 1.2 2.7 1.5 2.3
Labor productivity
1962-69 3.3 5.2 5.3 7.4 9.9 3.1 2.7
1969-73 3.2 5.7 5.2 6.6 9.1 3.9 2.6
1973-75 0.7 2.6 4.0 3.0 3.9 0.7 0.3
1975-78 2.0 5.0 4.5 1.3 4.1 2.0 2.1
Note: Real product wage is defined as the ratio of the nominal wage to the price of commodities produced.
. . Not available.
Source: Sachs, 1979.
20 percent of the growth of spending on social to high interest rates, they drive up the cost of
services and income maintenance, while changes borrowing, not only within the country, but
in eligibility and improvements in benefits contrib- worldwide.
uted 80 percent. Between 1975 and 1981 changes in
eligibility had ceased to be significant. Demo- E, on the industrial countries
graphic change then contributed 17 percent of the
growth, and improved benefits 78 percent. Pressures in the labor market and on public finance
To pay for the growth of spending, taxes rose in industrial countries have contributed to four
from 28.7 percent of GDP in 1961 to 37.5 percent in major problems since the late 1960s: inflation,
1981. That increase did not cover all the rise in unemployment, declining profitability, and a
spending, however; public sector deficits also broadly defined protectionism.
increased as a proportion of GDP. The significance * Inflation may be seen as the result of accomof
the general rise in public sector deficits is contro- modation to labor market pressures and the result
versial, in part because of the difficulty of separat- of deficit financing. One main effect of inflation is
ing the effects of business cycles and inflation from that it heightens uncertainty about the future-evithose
of structural trends in these deficits. It can be denced, for example, by the high inflation premiargued
that the deficits may sometimes have acted ums demanded in long-term interest rates. This
as a valuable support for demand during a period has significant implications for developing counof
recession. It is undeniable, however, that, tries, which have an interest in securing mediumdepending
on the method of financing, deficits and long-term loans to match the long gestation
have caused difficulty in some countries at particu- period of some of their development projects. Perlar
times. Where large countries such as the United haps the most important aspect of uncertainty,
States are concerned, deficits can have important however, is created by the inflationary cycle itself.
global consequences. Insofar as they contribute Experience that expansion breeds inflation
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