Productivity trends

ETUC, Palermo, August 2008

Why highlight productivity trends?

• Productivity plas a key role in wage formulaes

• Relative downturn in productivity trends

• ‘If workers want higher real wages, their productivity needs to increase faster’

• Mainstream economics: Faster productivity growth means more flexibility, easier firing

Productivity trends

Productivity growth pro hour (source: OECD)

0

0,5

1

1,5

2

2,5

3

3,5

97 98 99 2000 2001 2002 2003 2004 2005 2006

Euro

US

UK

Productivity trends

Productivity growth per hour

-2

-1

0

1

2

3

4

97 98 99 2000 2001 2002 2003 2004 2005 2006

GE

Fr

SP

IT

Productivity trends

-1-0,5

00,5

11,5

22,5

33,5

44,5

97 98 99 2000 2001 2002 2003 2004 2005 2006

Sw

DK

Finl

Comparing decades (Source:Robert Gordon

NBER paper 13840, 2008)

1970-1995 1995-2006

US 1,4 2,1

EU 15 2,9 1,4

EU 15 excl Med 2,8 1,9

Nordic 2,4 2

Anglo Saxon 2,7 2,2

Mediterranean 3,2 0,24

Continental 2,9 1,9

Ten year trend

1,41,7 1,6

1,9

0,6 0,550,9

2,15 2,12,4

2,8

0

0,5

1

1,5

2

2,5

3

EuroEuroexclIt SP

GE Fr It Sp DK UK US Fin Sw

Productivity and real wage growth

0

0,20,4

0,60,8

11,2

1,41,6

2001 2002 2003 2004 2005 2006

Productivity and real wage growth compared, euro area

Productivity

real wage growth

Has wage growth been price stability oriented ?

0

0,5

1

1,5

2

2,5

3

3,5

4

4,5

2001 2002 2003 2004 2005 2006

Productivity plus 2%

Hourly age growth

Trend productivity plus 2%

Line 5ww

Does labour market deregulation increase productivity?

• What explains/drives productivity?– Storm/Naastepad: Higher job

protection(0,14) ,real wage growth (0,5), GDP growth (0,13) imply higher productivity growth (Source: Economisch Statistische berichten 7 september 2007)

– Gordon:Higher job protection, higher unemployment benefits, higher product marker legislation increase productivity growth

Conclusion

• Intellectual basis to claim lack of flexibility and lack of competition are driving productivity downwards is pretty weak…

• It’s the opposite: Ensuring fair competition is key

• Can we convince the others actors of this ?