Labor Productivity and Growth | Global Finance

Labor Productivity Annual Growth Rate (%)

OECD Estimates Of Labor Productivity Levels (US$)

According to the OECD, labor productivity is defined as GDP per hour worked. More simply, productivity is a measure of output from a production process, per unit of input.

Labor productivity, therefore, is output per labor-hour. It is a measure of how efficient a given population is in producing goods and services. 

The labor input is defined as total hours worked by all persons engaged, and the data for labor input comes from the OECD Employment Outlook, OECD Annual National Accounts, OECD Labour Force Statistics and national sources.

Productivity is a key determinant of a population’s per capita income over the long term. Those countries that adapt well to the changing economic environment and embrace new developments and innovations are more likely to boast high productivity, according to economic think-tank the Conference Board of Canada.

However, productivity is often difficult to measure because of the cyclicality of labor markets and because of the range of qualitative and quantitative factors that can be taken into account when assessing productivity--such as time spent on creative processes—and also by the reliability of data on working hours.

Most OECD countries saw a gradual decline in labor productivity between 2004 and 2008. In 2009, there was a dramatic divide between those countries that saw a significant rise in productivity growth—such as Iceland, Spain and Estonia—and those that saw dramatic drops—such as the Russian Federation, Slovenia and Hungary.

The Russian Federation saw its productivity growth rate plummet between 2008 and 2009—going from 4.8 to -8.2, according to the OECD data. Luxembourg experienced a big drop in productivity growth between 2007—when it was at 6.1—and 2008---when it dropped to -7.2.

The highest productivity growth rates in 2009 were seen in Ireland—at 4.7%; Spain—at 3.1%; and Ireland—at 2.7%.

In addition to examining growth rates in labor productivity, it is also important to consider actual productivity levels—or GDP output per hour worked. Mexico, Russia and Poland ranked lowest for productivity in 2009—bringing in $19.00, $20.50 and $23.40 per hour worked, respectively.

At the other end of the spectrum, Luxembourg, Norway and Ireland have the most efficient workers—producing an output of $74.00, $73.30 and $60.20, respectively, per labor hour. They are followed closely by the US—which has an output of $57.40 per unit hour of labor.

Luxembourg is a clear example of the importance of evaluating both productivity growth and actual productivity in determining the efficiency of a particular labor market. Although it declined in terms of productivity growth for both 2008 and 2009, it still ranks highest of the OECD countries in terms of productivity.

Data is from OECD estimates of labor productivity levels and labor productivity growth, October, 2010.

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