Citizen paradoxes

In today's political-economic debate, there is a consensus that macroeconomic improvements, measured by increases in GDP or employment, are dissociated from their perceptions by ordinary citizens: while the former has seen notable increases for years, individual assessments of growth are more unsatisfactory. For each family, what determines their perception of what is happening in the country's economy is not the aggregate increase in GDP, but rather its income: what the former does matters little if it does not translate into increases in the latter.

And the citizen is right: GDP growth is one thing, per capita income is another, and household income is quite another. What determines the disparity in these magnitudes of progress? Changes in employment, labor productivity, population, and personal income distribution play a significant role in the transition from GDP to household income.

Growth is perceived as positive for the richest, but not for the rest of the country.

In Spain, between 2018 and 2024, GDP grew by a cumulative 8.9%, a good result despite the catastrophic decline caused by COVID-19. This progress was the result of a higher increase in full-time equivalent employment (13%) and a disappointing drop in productivity per person (-2.6%), reflecting a growth model with a marked employment bias. Furthermore, given that the population grew by 5.2% in those years (around 2.4 million), it is understandable that GDP per capita grew by only 3.5% (a modest 0.6% per year).

But that's not all. This average increase in GDP per capita tells us nothing about its distribution among different individuals: if it were egalitarian, that increase would be similar for each citizen. But this is not at all the case in our societies, where a small proportion of families accumulate a high proportion of national income. In our country, for example, in 2024 the Household Budget Survey shows how the richest 20% of families absorbed 40% of national income, while the poorest 50% only received 28%. The result? Very different perceptions of how growth affects different social groups: very positive for the richest and clearly negative for a significant portion of the country.

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Employment has grown strongly, GDP has advanced at a slower pace, GDP per capita has increased even less, and the income of lower-income families has grown even less. What can be done to reduce these disparities? There are no magic bullets, although there are some well-known and unappealing ones. To improve the well-being of the whole, there is no smoking gun: productivity must grow. To improve individual income, redistribution is the recipe.