While the GDP focuses on overall production, it does not address the major issues plaguing many nations. A declining environmental health will ultimately take a heavy economic toll across the globe. In addition, it does not account for the amount of black-market activities. In the meantime, the average citizen is unaware of these issues and their effects on the economy. Nonetheless, this is an important subject for a broad discussion.
Unpaid work
There has been considerable debate over the relationship between unpaid work and GDP. Unpaid household services, or unpaid labor, include tasks performed in the home. The term ‘unpaid work’ is often misused, referring to a broader category of activities. Examples of unpaid work include subsistence farming and domestic activities. In a world where more than half the population performs unpaid work, the value of unpaid work is large and can contribute to GDP.
Unpaid work is also related to GDP, as it accounts for travel time and non-business activities. Alvarez (2019) finds that between ten and 39 percent of GDP is accounted for by unpaid work, ranging from 2.6 to 7.1 hours per day in various countries. Women in Mexico and Hong Kong, for example, spend more than 7 hours a day doing unpaid work, and the lack of family-friendly policies may contribute to this.
Black-market activities
Although it is difficult to estimate the amount of black-market activities, many economists claim that they contribute at least 10% of the US GDP. The problem, however, is that black-market activities are not fully reported by countries. Moreover, most Third World countries do not have comprehensive economic regulations and are also hampered by poor bureaucratic enforcement. As a result, the amount of black-market activity is estimated to be as high as half the GNP in many countries.
While GDP does not measure the amount of money flowing through the shadow economy, its value is significant because it helps governments determine their economic policies. For instance, the U.S. Federal Reserve Bank uses GDP figures to set interest rates and other monetary policies. Consequently, inaccurate or low GDP figures could hurt the U.S. economy. Furthermore, underground economic activities reduce government revenue by reducing federal, state, and local tax revenues.
Productivity
The concept of productivity measures how much an economy can produce with the inputs it has available. It increases as more goods can be produced with the same amount of work. Productivity can also increase without adding more inputs, such as labor, which means more time spent on leisure. The definition of labour productivity refers to output per hour of work. The factors that affect labour productivity include technological change, management practices, and skills of workers.
Productivity growth has two main sources of economic growth. While GDP growth can increase the size of the economy, per capita GDP can only be increased by strong productivity growth. Productivity growth improves the quality of life of people by allowing them to enjoy a higher standard of living with fewer hours spent in paid labor. This, in turn, increases the standard of living for the entire population. This is why productivity growth is critical for economies.
Quality of products
It is difficult to measure how well a country’s quality of products is improving through the process of GDP, and the quality of products affected by GDP is a controversial topic. The first incarnation of GDP was based on the agricultural economy. The rich economies of today, though, are increasingly geared toward the quality of services and experiences offered, rather than merely the quantity of goods and services produced. It is not always easy to measure improvements in the quality of products and services, and GDP statistics are subject to change on an ongoing basis.
Leisure time
How does leisure time affect the GDP? There are a number of factors involved in this question, but they all have a direct effect on the economy. As GDP rises, people can take advantage of greater leisure time. The more wealth you have, the more leisure time you have. However, if you’re poor, you might not have as much time as a rich person, which may lead to fewer leisure activities.
The problem with the way GDP measures our standard of living is that it doesn’t take into account leisure time. For example, the GDP per capita of the U.S. in 1970 was $23,958. If that number had continued to grow at 1% per year, it would increase to $39,796, while if it grew at 5%, it would increase to $288,473! This is the opposite of what economists claim.
