…the power of population is indefinitely greater than the power in the earth to produce subsistence for man.
As we saw in the previous chapter, economic growth is dependent on a raft of factors. Not least among these are people – the population mentioned by Malthus in the above quote.
The exchange of labour in return for a wage is one of the defining features of industrialised societies, driving living standards, through increased specialisation and innovation, to new levels, as Adam Smith pointed out in 1776.2 In this sense, observing and understanding labour market trends are crucial to economic and social policy as well as investment decisions. Without human knowledge and skills, raw materials would remain just that. It is human skill and the use of knowledge to develop production methods that transform materials into goods that people want and need and that drive global economic growth.
Indeed, to understand the dynamics of an economy and its comparative performance, you have to understand its labour market. First of all, what is its productivity? Secondly, what is the composition of the labour force and how is it broken down into the different categories that can mean so much for whether long-term growth can be sustained? Thirdly, what is the number of people in the labour force as a whole and in these categories? It is well known that the ultimate drivers of economic growth are the productivity of the labour force plus the number of people ...