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US productivity accelerates, widening gap: Study

A new study by the International Labour Organisation (ILO) says that US productivity accelerated in 2002, surpassing Europe and Japan in terms of annual output per worker for the first substantial period since World War II widening the productivity gap with the rest of the world.

According to a new study by the ILO published on US Labor Day, 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 1,825 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.

The study added 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 industrialised 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. The study adds that European and other industrialised 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.

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.

The study adds that 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. ILO director-general Mr Juan Somavia notes that the overall global trends show that growth is not enough. "We must make productivity growth and job creation key objectives and pursue policies that combine these objectives with decent work," added Mr Somavia. The study shows US output per person employed growing 2.8 per cent in 2002 from 2001 levels, 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 US$ 60,728 in 2002, up from US$ 59,081 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 US$ 43,034. Belgium led the way at US$ 54,338, with France and Ireland topping US$ 52,000 and Germany at US$ 42,463.

According to a new ILO study, 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 US$ 52,486, 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 US$ 38, followed by France at US$ 35, Belgium at US$ 34 and the US at US$ 32, 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 report attributes 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.