Costs and Benefits of Economic Growth for Living Standards

• Growth is a major macroeconomic objective with significant benefits, including higher employment, higher incomes, and improved living standards.
• One of the biggest benefits of growth is that households will earn more disposable income due to firms making higher profits.
• Existing workers may get promoted in their jobs and earn higher salaries due to increased productivity.
• New workers may gain access to jobs and earn incomes.
• Growth can lead to higher employment as firms need to employ workers to produce the increased output.
• Firms enjoy economic growth as they make higher profits, which can trigger the accelerator effect where growth triggers more investment.
• The government receives a fiscal dividend as tax revenues increase due to higher incomes and spending.
• Growth can lead to higher income inequality if incomes are not distributed evenly across the economy.
• Growth can be unbalanced if it comes from one dominant sector, such as the oil industry in Nigeria or the financial sector in the UK.
• Growth can be capital intensive, meaning higher incomes are going to be contained to the owners of capital rather than for the whole of the population.
• Balanced growth is when growth can be continuous and strong, sustained over time, coming from a multitude of different sources.
• A strong role for the private sector is crucial for economic growth, as well as a strong role for the government to ensure tax revenues are used correctly, supply-side policies are in place, and redistributive policies are in place to ensure everyone benefits.
• Environmental costs caused by production can lead to welfare loss.
• Urban areas tend to have higher incomes than rural areas.
• Economic growth can lead to an income divide where those in cities see higher incomes, while those in the agriculture sector suffer with lower incomes.
• Sustainable growth is the key objective of economic growth, meaning growth without inflation and without the destruction to the environment.
• Inclusive growth is when everybody benefits from growth, not just a few or not just people in one dominant sector, but the whole of society.
• Unrestrained uncontrolled economic growth can lead to environmental destruction, such as air pollution, deforestation, soil erosion, resource depletion, and resource degradation.
• Growth can come with another macro objective, which is widening or creating a current account deficit, as incomes rise, households spend on goods and services from abroad, widening the current account deficit.