Long-term improvements in living standards depend heavily on productivity: how much value workers and businesses can produce with available resources. Productivity can rise through better technology, skills, infrastructure, management and organization.
Higher productivity creates room for higher wages and profits, although the distribution is shaped by institutions and bargaining power. An economy can become more productive without every household benefiting equally.
This is why economic growth and inequality should be analyzed together. Growth expands the available resources, while institutions influence how those resources are distributed.