Labor Productivity and Growth

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.

 

By Valentina Pasquali. Project Coordinators: Denise Bedell and Alessandro Magno

 

Labor Productivity Annual Growth Rate (%), 2001-2011

 

OECD Estimates Of Labor Productivity Levels (US$ value of goods produced per labor hour) - 2011

 

 


 

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.


OECD countries saw a gradual decline in labor productivity growth between 2004 and 2009, with the worst years of the crisis, 2008 and 2009, experiencing contractions of 0.1% and 0.3% respectively. The situation appears to have begun to recover in 2010, with labor productivity in this region returning to growth (2%,) and in 2011, with a more meager 0.8% growth.


Things are not on the upswing everywhere. In Greece, the European country worst hit by the sovereign debt crisis that has been undermining growth and prosperity across the European Union, labor productivity continues to fall, declining by 2.8% in 2010 and another 0.9% in 2011 after negative performances in both 2008 (-1.5%) and 2009 (-0.3%).


In the United States, labor productivity growth stalled in 2008 (+0.7%,) increased in 2009 (+2.1%) and 2010 (+3%,) before stalling again in 2011 (+0.6%.)


In the Russian Federation, things took a turn for the better in 2010 (+3.8%) as well as 2011 (+4.2%,) after dropping a stunning 5.2% in 2009.


Russia was one of the best performers of 2011, alongside Mexico (3.2%.) In 2010, the best performances had been those of South Korea (+6.4%,) Chile (+5.3%,) Estonia (+4.6%,) and Ireland (+4.5%.)


In addition to examining growth rates in labor productivity, it is also important to consider actual productivity levels—or GDP output per hour worked. Chile, Mexico and the Russian Federation ranked lowest for productivity in 2011—bringing in $20.40, $20.40 and $22.1 per hour worked, respectively.


At the other end of the spectrum, Luxembourg, Norway and Ireland had the most efficient workers (same as in 2010)—producing an output of $77.10, $74.90 and $66, respectively, per labor hour. The United States is fourth, with an output of $60.90 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 from 2008 to 2011, 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


Labor Productivity Annual Growth Rate (%)


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OECD Estimates Of Labor Productivity Levels, 2011


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