Economic growth is about so much more than having more money in your bank account. It has lifted millions of people out of poverty and improved their lives in countless ways, and it’s also a key policy priority for governments and international institutions around the world.
When we talk about economic growth, we usually mean a country’s total market value of additional goods and services produced over time. This measure of growth is commonly reported as the rate of gross domestic product (or GDP) or some other similar estimate. It’s important to note that a country may experience extensive economic growth without a significant increase in its land, labor, or capital resources. This type of growth generally occurs when the existing resources are used more efficiently or productively, such as by boosting productivity or improving the skills and motivation of workers.
Extensive growth can be driven by a number of factors, including population growth, increased entrepreneurship and investment, or even discoveries of new resources. However, the most common and sustainable source of extensive economic growth is an improvement in labor productivity. This allows more of the workforce to produce more goods or services without working more hours, which in turn leads to greater prosperity for everyone.
In the past 50 years alone, global GDP has grown sixfold, and average per capita income has tripled. Yet, this progress has been uneven. Many developing countries still struggle to lift people out of poverty, and inequality has risen in many advanced economies. Research by McKinsey Global Institute shows that it’s vital to boost economic productivity and improve labor quality to sustain this growth and ensure its benefits reach the broadest possible range of people.