Let me begin with a proposition: in most modern societies, real wages are the ultimate measure of economic success. In pre-modern societies, most people are subsistence farmers (or hunter-gatherers before that) and wages have no meaning. In post-modern societies, most people will get their incomes from capital or from Star Trek space communism. But right now most people earn a living in labor markets, and real wages are the ultimate measure of economic success.
Noah Smith, correctly, pointed out that the Dominican Republic is in the middle of growth episode to rival anything in East Asia. In 2019, the D.R.’s GDP per capita blasted past Italy-circa-1977 and Spain-circa-1989, times when both countries were considered “developed” countries, albeit on the poorer side of developed. And by some measures, the D.R. could be considered as developed as Italy was in the 1970s. Consider passenger cars. In 1972, Italy registered about 240 passenger cars per 1,000 people, up from 49 in 1960; in 2014, the D.R. enjoyed 128.
The Dominican Republic’s growth rate in per capita GDP has been solid: slower than Italy but rivaling Spain during their catch-up periods. It took Italy 27 years to go from circa $5,000 per capita to circa $18,000. Spain took 35 years to cover the same ground. The D.R. did it in 37, from 1982 to 2019! So not bad at all.
But.
Dominican growth has not trickled down. Real wages have been pancake flat. And that does not look at all like southern Europe during its catch-up phase. Sure, it has more cars than Italy had back in ‘77 … because it is right next to the world’s largest exporter of used vehicles. Reals wages, however, measure how much of everything you can buy, and they look bad. The International Labor Organization publishes wage estimates … and they do not look like a country that is experiencing explosive economic growth.

Over the last 21 years, average real wages have only risen 17% … whereas GDP per person has more than doubled. Moreover, I left out ILO real wage data from the late 1990s because it used different sources than the post-2000 figures … but if you take those estimates at face value then average real wages are now 15% lower then than they were in 1997.
Stagnant (or falling) wages are consistent with estimates of the labor share of national income.1 In the 1990s, the labor share in the Dominican Republic looked similar to Italy and Spain. (Sadly, I haven’t been able to find data for Italy in the 1970s or Spain in the 1980s, but I doubt that it looked all that different.) There is a gap in the data, but by the time that the second decade of the 21st century rolls around, the Dominican labor share has collapsed.2

When you visit the D.R., there are certainly signs of growth. Santo Domingo now has a subway! (The government just issued a contract to build a third line.) The “Happy Families Housing Plan” aims to build 60,000 new houses.3 A bunch of new freeways have been built in tourist areas. And tourism exploded before Covid took a hammer to it.
But at the end of the day, Dominican living standards have risen by far less than you would expect in a country growing so fast … as they have likely risen more slowly than they did in other countries that grew that fast in the past.
Why are wages lagging growth by so much? I do not know. The World Bank has noticed the problem. It suggests a boatload of different reasons:
Women entering the labor market in large numbers;
Women finding discrimination in labor markets;
Low official minimum wages;
Collusion in labor markets;
Technological change—blame it on the robots!
Their own data (page 13 and page 36) suggest two additional causes:
Employment growth is concentrated in services, whereas productivity growth is concentrated in manufacturing;
Remittances from the 1.2 million Dominicans living in the United States might discourage working.
And there is one other possibility:
GDP is growing, but all of the additional income is going to foreign investors.
Do we have any evidence about which are the most important? Well, the female labor force participation rate (LFPR) skyrocketed from 39% to 53% between 2009 and 2019. If that happened because of some exogenous sociological shift, then you have your explanation right there! But if it happened because family incomes were stagnant, then you have to dig deeper. In the absence of evidence of a social revolution in the D.R., I suspect that the rising female LFPR is an effect of stagnant (or falling!) wages rather than a cause.
Remittances certainly discourage working: people who live in households that collect remittances are 6 to 10% less likely to be in the labor force, all other things equal. But that doesn’t explain low wages. In fact, by giving people an alternative to working, remittances should raise wages!
What about the robots? I am not convinced. Nobody is yet automating hotel workers. And manufacturing wages are still very low. Unless Dominicans are particularly bad at factory work, wages are low enough to compete with China or Mexico. (And the D.R. enjoys free trade with the U.S.) And it isn’t rocket science to figure out how to staff a Dominican resort at Floridian levels: stagnant service productivity is not a given. In fact (see page 14) service sector productivity growth contributed a third of the country’s total productivity growth— “slower than manufacturing” ≠ zero.
Minimum wages, meanwhile, are a way to fix broken labor markets. But low minimum wages cannot cause wages to fall in the context of skyrocketing economic growth unless labor markets are already broken.
Finally, we can rule out possibility (8). GDP measure the value of all income earned by production within a country’s borders. GNI measures the income earned by all residents located within a country’s borders—in other words, it adds the income earned on foreign investments and subtracts the income earned by foreign investors.
For the D.R., GDP has been consistently 5% higher than GNI since 1985, with very little variation. Foreign imperialists aren’t the culprit.
That leaves the most likely culprit as something deeply wrong with Dominican labor markets. A lack of competition? Over-regulation? Something else? I don’t know. But if the D.R. wants to become a developed nation in the next decade—and there is no reason it cannot—then it needs to set about figuring out the problem and fixing it. Otherwise we could get another decade of “growth” that does nothing to improve the conditions of Dominican families.
The “labor share” includes benefits and some forms of income that you might normally think of as profits, particularly for small-businesses and the self-employed.
Stagnant wages are also consistent with figures showing a stagnant stock of automobiles per person. Italy and Spain are now north of 600 per 1,000 people, in line with the United States.
Which is very little in a country of 10.5 million people and almost 3.0 million housing units. Sadly, the Covid pandemic canceled the 2020 census, which will take place this year, so housing comparisons with 2010 aren’t yet possible.