Productivity is always in the news, not least because Nobel economist Paul Krugman says: “A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise output per worker”
Productivity not only determines the SoL (Standard of Living) of everyone in the land but it also has a significant impact on their QoL (Quality of Life):
- SoL is determined mostly by the cash wealth people have to be able to afford a certain volume and quality of goods and services – the tangibles of life – ergo, it’s a measure of a population’s success in climbing the old materialism ladder
- QoL is determined mostly by extra factors which add to the mental well-being of individuals, including improvements in their physical and mental health, communications with family and friends, social lives, education levels, environment quality and leisure/ pleasure activities – ergo, it’s a measure of a population’s success in the newly emerging mentalism world
WHO – the World Health Organisation – goes further and defines QoL as: “An individual’s perception of his position in life in the context of the culture and value systems in which he lives and in relation to his goals”
But why do improvements in national SoL and QoL rely on productivity?
- SoL improvements depend on unit costs and so prices being lowered, enabling more people to afford more goods and services they like-to-have on top of those they must-have – and, at the same time, increasing firms’ overall sales revenue and profits enabling them to pay higher wages so people can afford other stuff once out of their reach
- QoL improvements depend on innovation and technology offering them additional goods or services they like-to-have which provide them with more information, leisure and pleasure at very low prices, even for free, in exchange for valuable information on their buying habits and preferences which suppliers then analyse to better target their sales and marketing efforts
SoL improvements thus lead to more material comfort – QoL improvements lead to more mental satisfaction
Hence, most people focus on improving their SoL first by seeking wage rises and climbing promotion ladders – then move on to higher QoL issues
Indeed, Princeton University professors have established that, once people earn more than $75,000 per year (equivalent to £50,000 say), the extra income doesn’t bring them more happiness, nor less unhappiness or stress:
- Up to that point, their enjoyment of being able to afford more material goods and services steadily rises
- Beyond, however, it levels off so they look elsewhere for more in life
The problem nowadays is that many people in developed economies find themselves at this watershed between materialism and mentalism:
- Their material SoL needs have been largely met – they have ‘enough’ – how many cars, fridges or TVs does any one person need?
- They’re now tentatively seeking to meet their higher QoL needs, unsure which way to go and so following all others – hence most wear the same branded gear, have their own iphone, use the same social media
Sadly, global communications are so good and extensive, they’re extinguishing vital differences between both individuals and nations – sit in a hotel in any modern capital nowadays, look out of the window, and you could be in any one of them
However, on a more positive note:
- There are billions of people in undeveloped or developing countries who still do not have anywhere near ‘enough’ goods and services – their SoL is such that most continue to endure many negatives of life, and can only dream of positives – so there’s enormous unmet demand out there for existing businesses to do well
- And this century seems likely to be dominated by demand to improve QoL for everyone, thus offering businesses worldwide enormous potential
A dismal future?
Not one bit!