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Economists use the rule of 70 to quickly calculate the number of years required for a variable to double at a given growth rate. If the variable grows at the rate x% per year, then 70 divided by x (drop the percent) tells you the number of years it takes for this variable to double.

The article uses this kind of calculation to show the difference between labor productivity growth of 1.4% versus 2.5%. At a growth rate of 1.4% per year, labor productivity (and wages) will double every 50 years because 70 divided by 1.4 is about 50. A growth rate of 2.5% will double labor productivity every 28 years because 70 divided by 2.5 equals 28.

If the average employee compensation grew at the rate of 3.5% per year, how many years would it take for it to double?

 

Business Economics, Economics

  • Category:- Business Economics
  • Reference No.:- M9272199

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