Where Are Increased Living Standards Coming From?

Almost entirely from digital goods and services, in contrast to physical goods and services, according to Progressive Policy Institute article,

1. Per capita real consumption of physical goods and services, outside of housing and health care,  has grown by only 10% since 2000, or an average of 0.6% annually.  By comparison, per capita real consumption of digital goods and services has skyrocketed, growing by 64%, or  3.4% annually.

2. In other words, to the extent that consumer living standards have been rising, the gains have been mainly driven by digital goods and services. For example, per capita real consumption of communication services–including internet, wireless, and cable–is up by 60% since 2000. This calculation is based only on government data, without taking into effect possible unmeasured gains in consumer surplus.

3..  By contrast, in the physical sector  per capita real purchases of motor vehicles and parts has risen by only 6% since 2000, or only 0.4% per year.  Similarly, per capita real purchases  of food and beverages for  home use has risen by only 4%, or 0.3% annually. It should be noted that food processing is a manufacturing industry which has shown no labor productivity growth in the past ten years.

4. The Digital Nation is mainly characterized by falling or flat consumer prices, while the Physical  Nation is mainly characterized by rising consumer prices.  In the digital sector, consumers spend less to get more, while in the physical sector, consumers spend more to get less. The price of communication services is basically flat since 2000, allowing even low and middle-income households to participate in the App Economy.

The whole article is short and worth the read.