Final answer:
After five years, Canadian workers will have higher productivity at $31.53 per hour than UK workers at $28.98 per hour, a difference of $2.55 per hour. The productivity index in the U.S. shows that output per hour has doubled since the early 1970s.
Step-by-step explanation:
Let's calculate the future productivity levels of workers in Canada and the United Kingdom based on the given annual growth rates. Starting with Canada, whose workers initially produce at $30 per hour, we apply a 1% annual increase over five years. Likewise, for the UK with an initial productivity of $25 per hour, we apply a 3% annual increase over the same period.
Using the formula for compound growth, Future Value = Present Value x (1 + growth rate)^number of periods, we get the following:
For Canada: $30 x (1 + 0.01)^5 = $30 x 1.051 = $31.53.
For the UK: $25 x (1 + 0.03)^5 = $25 x 1.159 = $28.98.
After five years, Canadian workers will still be more productive than their UK counterparts, with a higher productivity level of $31.53 per hour compared to $28.98 per hour, which is a difference of $2.55 per hour.
a
Considering the labor productivity in the U.S. economy, we see from historical data that the index of output per hour has doubled from the early 1970s to recent years, taking into account the changes in the slope of productivity growth. This is significant because such productivity growth has substantial implications for economic performance, wages, and living standards.