OECD Compendium of Productivity Indicators 2017

OECD

• Publisher: OECD
• Year: 2017
• eBook ISBN: 9789264274563
• Topic: Social Sciences
• Subtopic: Sociology
• Index: Social Sciences

Chapter 1. Recent trends on productivity and post-crisis labour income

A low growth trap

Eight years after the global financial crisis, GDP per capita remains at pre-crisis levels, or even below, in many economies. In some European economies, including Finland, Italy and Spain, GDP per capita in 2015 (in real terms) was around 10% lower than the level achieved in 2007. Indeed, among OECD countries only a handful, chiefly “catch-up” countries – Chile, Poland, Korea and Turkey – saw a significant improvement on pre-crisis levels and although emerging economies fared much better, growth rates in most have slowed considerably in the post-crisis period. The overall picture points to slowing rates of growth in most countries, compared to the pre-crisis period, and with it fears of many being trapped in a low-growth environment (Figure 1.1), as productivity growth continues its long-term decline in most economies (Figure 1.2).

Figure 1.1. GDP per capita, national currency, constant prices, 2015

Indices, 2007 = 100

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477005

Figure 1.2. Trend labour productivity growth in selected OECD countries

Total economy, percentage change at annual rate

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477012

Figure 1.2. Trend labour productivity growth in selected OECD countries (cont.)

Total economy, percentage change at annual rate

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477020

Labour utilisation a driver of growth in the post-crisis period

In many countries, especially those that have experienced higher than average OECD growth rates, post-crisis GDP per capita growth has largely been sustained by increased contributions from labour utilisation. This differs significantly from the pre-crisis period, where the contribution from labour utilisation had only a limited impact in most countries and indeed declined in many (Figure 1.3). In some countries, notably the United Kingdom and the United States, increases in hours worked per capita accounted for a significant share of GDP per capita growth over the period 2010-15, making up for limited labour productivity growth. However, the pattern of increased contributions from labour utilisation is not universally true; in Southern European economies, particularly those hit hard by the crisis and the euro-area crisis that followed, the contribution from labour utilisation has been negative in the post-crisis period.

Figure 1.3. Growth in GDP per capita, labour productivity and labour utilisation

Total economy, percentage change at annual rate

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477037

While increases in labour utilisation rates are welcome because they signal increasing employment rates and, possibly, reductions in involuntary unemployment (Figure 1.4), the fact that they, rather than productivity, have been the most important driver of economic growth in many economies in the post-crisis period is of concern for long-term growth. The capacity of labour utilisation to drive growth cannot be infinite, especially as in many economies demographic changes point to ageing populations, which, all other things being equal, erodes the potential for labour utilisation to continue to drive growth in the longer term (Figure 1.4). Moreover, in most economies, increases in labour utilisation have been driven by increased employment but with corresponding declines in average hours per person, likely indicating that employment growth has been driven by increases in part-time working; which may have been in lower productivity activities.

Figure 1.4. Growth in labour utilisation

Total economy, selected countries, percentage change at annual rate

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en and OECD Employment and Labour Market Statistics (database), http://dx.doi.org/10.1787/lfs-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477040

Slow capital deepening has contributed to slower productivity growth

Capital deepening has stalled in nearly all large OECD economies and declined significantly in most (Figure 1.5). In Germany, Japan and the United States for example, capital deepening growth has fallen to close to zero in the post-crisis period.

Figure 1.5. Capital deepening

Total economy, percentage change at annual rate and percentage of GDP

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477056

The rate of capital deepening was an important driver of labour productivity growth across OECD economies in the pre-crisis period, but in the aftermath of the crisis the contribution of both ICT and non-ICT investment has stalled (Figure 1.6), in line with lower rates of investment (Figure 1.7), as has MFP growth, lending some weight to the arguments that technological spillovers and diffusions from Information and Communication Technologies (ICT) and other new technologies may be lower than from earlier technology breakthroughs (Cowen, 2011; Gordon, 2012, 2016). However, the evidence on this is not conclusive. For example, declining MFP may, at least in part, also reveal other inefficiencies in the combined utilisation of labour and capital inputs, notably skills mismatches (Adalet McGowan and Andrews, 2015) but also capital misallocation (Gopinath et al., 2015) or a slower pace at which innovations spread throughout the economy from frontier firms to other firms (Andrews, Criscuolo and Gal, 2015). In addition, analysis by the OECD and IMF (Ahmad et al., 2017 forthcoming) suggests that mis-measurement (such as overlooked quality improvements that might affect price measurement of ICT goods) is unlikely to explain the slowdown in MFP.

Figure 1.6. Contributions to labour productivity growth, 1990-2015

Selected OECD countries, total economy, percentage change at annual rate

Source: OECD Productivity Statistics (database), http://dx.doi.org/10.1787/pdtvy-data-en, April 2017.

StatLink http://dx.doi.org/10.1787/888933477063

Figure 1.7. Investment rates

Non-residential gross fixed capital formation as a percent of GDP

Source: OECD National Accounts Statistics (database), http://dx.doi.org/10.1787...

Table of contents

• Title page
• Legal and rights
• Foreword
• Executive summary
• Reader’s guide
• Chapter 1. Recent trends on productivity and post-crisis labour income
• Chapter 2. Economic growth and productivity
• Chapter 3. Productivity by industry
• Chapter 4. Productivity, trade and international competitiveness
• Chapter 5. Productivity trends in G7 countries
• Chapter 6. Methodological chapter
• About the OECD