US productivity accelerated in 2002, surpassing Europe and Japan in terms of annual output per worker for the first substantial period since WWII and widening the productivity gap with the rest of the world, according to a new study by the International Labour Office (ILO) published on US Labor Day.
In Key Indicators of the Labour Market (KILM)
(see note 1), the ILO noted that part of the difference in output per worker was due to the fact that Americans worked longer hours than their European counterparts. US workers put in an average of 1,815 hours in 2002 compared to major European economies, where hours worked ranged
from around 1,300 to 1,800. In Japan, hours worked dropped to about the same level as in the US, the ILO said.
In other key findings, the KILM shows that:
- Growth in productivity per person employed in the world as a whole accelerated, from 1.5 per cent during the first half of the 1990s, to 1.9 per cent in the second half. Most of this growth was concentrated in industrialized economies (the US and some EU countries), plus some in Asia (China, India, Pakistan and Thailand). In Africa and Latin American economies, available data showed declines in total economy productivity growth since 1980.
- European and other industrialized countries – while
achieving slightly lower productivity growth rates on average than the US – had improved their „employment-to-population ratios“ which measures the proportion of people in the population who are working (see note 2). While unemployment rates in the EU as a whole remained above those in the US, many European countries were able to maintain or improve their ability to create jobs, while achieving moderate growth in productivity. The EU increased the employment-to-population ratio from 56.1
to 56.7 per cent between 1999 and 2002 while reducing unemployment, the KILM says. - Although the employment-to-population ratio in the US declined by 1.6 – from 64.3 to 62.7 per cent in the same period, overall it remained consistently higher than the EU. Over the longer term, the US economy has had higher employment and productivity growth rates than the EU. Thus, the report shows that positive development in job creation and productivity are possible over the longer term.
The 3rd edition of the biennial KILM examines 20 key indicators of the labour market, including employment, unemployment, underemployment, hours worked, labour productivity, types of economic activity and how youth and women are faring in the labour markets. For the first time, the KILM also examines agricultural productivity and notes that this sector remains the primary employer in many developing economies. The new analysis suggests that a rise in productivity and employment may be the only way to reduce poverty.
„The overall global trends show that growth is not
enough,“ said ILO Director-General Juan Somavia. „We
must make productivity growth and job creation key objectives and
pursue policies that combine these objectives with decent
work.“
Global productivity
The KILM is the only report published by an international
agency that includes estimates on total economy labour
productivity.
The KILM showed US output per person employed growing 2.8 per
cent in 2002 from 2001 levels (see note 4), for an average growth rate
over the past seven years of 2.2 per cent. This was double the
growth rate of 1.2 per cent in the European Union and 1.1 per
cent in Japan during the same period. The report says output per
person employed in the US reached a level of USD60,728 in 2002,
up from USD59,081 in 2001. In major EU countries last year,
average labour productivity growth in per person terms was 1.1
per cent, yielding an output per person employed of USD43,034.
Belgium led the way at USD54,338, with France and Ireland topping
USD 52,000 and Germany at USD 42,463.
Greece had higher labour productivity growth than the US in
2002 at 4.1 per cent. At the same time, Ireland closed the
productivity gap with the US, France and Belgium by increasing
its productivity levels to USD52,486, reflecting an increase of
2.2 per cent from 2001 levels.
The figures for output per hour worked show Norway, France and
Belgium ahead of the US since the mid 1990s. In 2002 Norway had
an output per hour worked of about USD38, followed by France at
USD35, Belgium at USD34 and the US at 32 (figures are rounded off
to the nearest dollar), thus showing that part of the gap between
the US and Europe in output per person employed is due to
differences in hours worked.
Besides the difference in hours worked the KILM attributed
much of the growth in output per person employed in the US to two
other factors: the production and diffusion of information and
communication technology (ICT) in an enabling economic
environment, and the growth of service industries such as
wholesale and retail trade and financial securities that depend
on ICT. With the exception of Finland and Ireland, most EU
countries were unable to match the US in such developments in
1990s.
In the agricultural sector, the KILM shows that employment in
the sector has rapidly declined in developed economies, but not
in the rest of the world. The agriculture sector remains a
cornerstone for a large number of developing countries in terms
of employment and poverty alleviation strategies. Productivity in
agriculture shows continued growth in all economies. However,
productivity levels in agriculture, published for the first time
in KILM, remain higher in developed economies. In the US, for
example, an agricultural worker produces over 650 times more than
an agricultural worker in Vietnam.
Given the relatively large size of the agricultural sector in
developing economies, the sector remains a potential contributor
to faster productivity growth. With the employment share of the
agricultural sector gradually declining, shifting labour to other
sectors should improve both employment and productivity growth
over the longer term. Access to domestic and international
markets in agricultural goods and the development and
implementation of environmentally sustainable technologies are
important vehicles to raise productivity growth in
agriculture.
Hours worked
The slowdown in Gross Domestic Product (GDP) growth that began
three years ago – and was influenced by the Sept. 11, 2001
terrorist attacks – was reflected in a parallel decrease in
annual hours worked per person in most countries worldwide, the
KILM shows based on available information. Although productivity
increased, hours worked in the US declined each year since 2000,
dropping from 1,834 in 2000 to 1,815 in 2002. More significant
declines were reported during the same period in Norway (from
1,380 to 1,342), Sweden (from 1,625 to 1,581), France (from 1,587
to 1,545), Australia (from 1,855 to 1,824), Canada (from 1,807 to
1,778), Ireland (from 1,690 to 1,668) and Germany (from 1,463 to
1,444). Japan, where people once worked much longer, is now at
about the same level as in the US, the KILM says.
Over the longer term hours worked in Australia, Canada, New
Zealand and the US have been more or less stable since the 1980s,
whereas in the rest of the industrialized world hours worked have
steadily declined (apart from some cyclical fluctuations) in the
last two decades.
Worldwide, a number of countries reported much higher hours
worked than in the US. The report noted that in South Korea, for
example, people worked 2,447 hours in 2001, the longest hours
worked of all economies for which data were available – 26 per
cent more than people in the US and 46 per cent more than in the
Netherlands, which had the lowest hours worked of all economies
for which data were available. „In all developing Asian
economies where data were available, people historically worked
more than in industrialized economies. This is a typical sign for
developing economies as they often compensate for the lack of
technology and capital with people working longer hours,“
the report said.
In some transition economies, hours worked reflected both the
ongoing shift from agriculture to manufacturing and services, as
well as away from centralized economies. Workers in the Czech
Republic, for example, put in 1,980 hours in 2002 – despite a
heavy decrease in recent years – and thereby worked the longest
hours within OECD economies along with Slovakia (1,978 hours) and
Greece (1,934).
Ireland provides a good example of the changing pattern in
working hours that occurs when an economy moves through the
development process, the report said. Along with the sectoral
shift from an agricultural based economy to manufacturing and
services, hours worked by people in Ireland fell from just above
1,900 annually in the 1980s to 1,668 hours in 2002, a drop of
nearly six 40-hour workweeks per employed person and more than
doubling productivity per person employed between 1980 and
2002.
Creating and maintaining jobs
Most industrialized economies (with the exception of Germany
and Japan) increased output and nominal employment during the
period 1999-2002. Additionally, European economies such as
France, United Kingdom, Belgium and Ireland increased their
employment-to-population ratios while reducing unemployment rates
during this period.
Although unemployment rates in Europe have generally been
higher than those in the US, since the early 90s the unemployment
rate in a number of countries within the EU have decreased, the
report said. EU countries such as Ireland have reduced
unemployment rates from among the highest in Europe in the early
1990s to below the US in 2002. Additionally, Luxembourg,
Switzerland, Netherlands, Iceland, Norway, Denmark, Portugal, UK,
and Sweden all have unemployment rates lower than the US, for
different reasons. Other labour market indicators in the report
support the conclusion that the US labour market reacted
differently to those in Europe during the latest economic
downturn, perhaps due in part to the different degrees of labour
market flexibility and national attitudes toward policy
intervention, the report says.
For example, in addition to diverging unemployment and
employment rates, the US shows different results from the
majority of European economies when it comes to finding jobs for
youth and persons unemployed for a long period of time (one year
or longer) during this economic downturn. The US has recorded
increases in both the youth unemployment rate and the long-term
unemployment rate since 1999, whereas the rates of both
indicators declined in a large number of other industrialized
economies.
Employment-to-population ratios in Latin America showed mixed
results over the past decade. Declines between 1990 and 2002 were
evident in Argentina (falling to 37.1 per cent), Chile (dropping
to 35.3 per cent), Colombia (falling to 51.6 per cent) and
Uruguay (falling to 47.6 per cent). However, Peru and Venezuela
experienced growth in their employment-to-population ratios, 62.5
and 58.9 per cent, respectively.
In Asia, the employment-to-population ratio declined by 2.8
per cent from 60.7 in 1995 to 58.6 in 2001 in South Korea, while
in the same period Hong Kong, China’s ratio dropped by 2.8
per cent from 60 to 58.3. Malaysia and Thailand all recorded
declines in the employment-to-population ratio for 1995-2000.
Malaysia’s ratio declined by 2.7 per cent, from 65.3 to 63.5.
Thailand had one of the highest declines in the region, falling
by 12.6 per cent, from 77.5 to 67.7. Even with the declines, the
Asian economies typically record high employment-to-population
ratios; with the exception of Sri Lanka, all of Asia’s major
economies recorded employment-to-population ratios of between 50
to 70 per cent.
The KILM also highlights the wide disparities in employment in
agriculture, illustrating the importance of world trade
negotiations to poverty reduction in developing countries. Among
the 20 richest economies in the world, the KILM said agricultural
employment was quite low, ranging between 1.4 per cent in the UK
and 7 per cent in Ireland. In transition economies, however, the
range was between 4.8 per cent (Czech Republic) and 52.7 per cent
(Georgia). In many Asian and African countries it is higher than
70 per cent, while in Latin America it is as high as 43.6 per
cent (Nicaragua) and 50.6 per cent (Haiti). In Middle East and
Northern Africa it is rather low in the oil producing economies,
but as high as 75 per cent in the non-oil producing
economies.
Note 1 – Key Indicators of the
Labour Market Third Edition. International Labour Office, Geneva,
2003. ISBN92-2-113381-8. Available in text, CD-ROM or Internet
versions. The 900-page volume reflects an effort by the ILO to
select and refine indicators of global labour trends and contains
comparative data from some 240 countries and territories
worldwide This press release and data charts can be found at
kilm.ilo.org/2003/PressPackage/ (User ID: kilmpress2003,
Password: press)
Note 2 – The employment to
population ratio measures the proportion of an economy’s
working age population (15+) that is employed: as such, the
change in this figure is a good indicator of the ability of an
economy to create jobs.
Note 3 – Productivity is
measured as annual output divided by person employed. Output is
measured as GDP in terms of purchasing power parities (PPPs). A
key characteristic of KILM’s productivity figures is the use
of PPPs to convert output in national currencies to a standard
measure of value that avoids distortions caused by fluctuating
exchange rates. The KILM measures productivity in two principle
ways: annual output per person employed and average output per
hour worked. However, estimates of output per hour worked are
less comparable across countries than output per person employed,
because the measure of hours worked can vary significantly.
Note 4 – The US Department of
Labor, Bureau of Labor Statistics (BLS) data released in August
2003 indicated a continuing growth trend in 2003.
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