Comparing Productivity Across the World
In a world of growing business competition, which nation is performing best in terms of productivity? That depends on which data you're using and which trend you're most interested in. A number of nations – including the U.S., Russia, France, China, and Belgium – have had impressive numbers in recent years.
Productivity is, after all, a convenient but imperfect yardstick that reflects work accomplished per employee. In theory, this allows even the smallest of nations to compare themselves with larger ones. In practice, however, productivity is tough to measure, especially in the service sector. And governments tend to calculate it in slightly different ways. U.S. productivity, for example, is usually measured in output per hour, whereas European productivity is usually measured in output per employee. Despite this, there's a good deal of international data on how countries are performing in terms of productivity.
It is often assumed that the U.S. has the world's most productive workforce, and by some measures it does. The International Labor Organization measures labor productivity as the value added per person employed, in 1990 U.S. dollars. Using this standard, the U.S. economy produced an average value of $54,879 per worker in 2000. The nearest competitor to the U.S. was Belgium, at $53,338 per worker, a difference of more than $1,500 per employed person. The difference between the U.S. and Canada was almost $10,000 per worker, and the difference between the U.S. and Japan exceeded $14,000. When productivity is measured as value added per hour worked, however, French workers produced $33.71 in value per hour in 2000, compared with U.S. workers at $32.84. Belgian workers also outpaced the U.S. in value per hour worked, averaging $32.98.
As for labor productivity growth, the U.S. has tended to outpace most nations in the European Union (EU) in recent years. Between 1995 and 2000, labor productivity in the U.S. grew by an average of 2%, compared with 1.4% in the EU, according to data from The Conference Board. Even in 2001, only two nations in the EU had higher productivity growth than the U.S.: Greece and Ireland, both of which posted 3.5% labor productivity growth.
Another area of the world enjoying impressive productivity growth is Russia. "Labor productivity and efficiency levels have been Russia's biggest problems since the Soviet era," says Ruben Vardanyan, CEO of Troika Group, a Moscow financial services firm. Yet largely thanks to improvements made in newly privatized companies, Russian industry has posted productivity gains of 31% since the August 1998 collapse of the ruble, according to a recent study by Peter Boone, head of research at Moscow brokerage Brunswick UBS Warburg.
Any international claim to the fastest labor productivity growth, however, might well go to China. Between 1990 and 2000, China's nonfarm productivity rose at an annual rate of 8.1%, according to Morgan Stanley economist Andy Xie, a leading expert on Asian economic trends. During the same decade, China's agricultural productivity rose at a brisk 4.8% annual rate. How is China raising its productivity rates so quickly? Xie points out that China is in transition from an agricultural to an industrial economy, with its greater use of manufacturing technology and therefore greater efficiencies. "Because the output of a worker in industry and service is 4.6 times that of a worker in agriculture, every one percentage point of labor redistributed from agriculture to industry/service improves labor productivity by 1.2 percentage points," Xie writes. In 1990, 43% of the Chinese labor force worked in nonfarm industries; by 2000, the figure had risen to 54%. If the trend continues, Xie predicts, 62% of Chinese workers will be employed in nonagricultural jobs by 2010, which means that its productivity figures will continue to rise.
As a result, China's gross domestic product (GDP) will rise along with its productivity rates, lifting more and more Chinese out of poverty. David Dollar and Aart Kraay, economists at the World Bank's Development Research Group, explain that across the globe, incomes of the poor grow at around the same rate as GDP. Dollar and Kraay observe that the incomes of the poor in China have risen dramatically along with productivity growth. In fact, they insist, China's progress in reducing poverty should be hailed as "one of the most dramatic successes in history."
For more information on the International Labor Organization study, "Key Indicators of the Labor Market 2001-2002," see
http://www.us.ilo.org/news/prsrls/20010831_kilm.html
In 2002, The Conference Board published "Performance 2001: Productivity, Employment and Income in the World's Economies," which can be ordered from The Conference Board Web site at
http://www.conference-board.org/products/researchreports/dpubs.cfm?id=486
For more information on international comparisons of productivity, see
http://www.bls.gov/fls/flsprody.htm
The following articles were used in the creation of this TrendWatcher:
Belton, Catherine. "A Gleam of Hope for Russia Inc." BusinessWeek, June 17, 2002, p. 48.
Dollar, David and Aart Kraay. "Spreading the Wealth." Foreign Affairs. Global NewsBank. February 2002, pp. 120-133.
"Starting to Work." The Economist, May 18, 2002, pp. 72-73.
Xie, Andy. "Measuring China's Economy: An Inside Glimpse of Capital Investment, Deflation and, of All Things, a Strange Agricultural Productivity Boom." The International Economy. IAC Business Index. Spring 2002, p. 46.
Productivity is, after all, a convenient but imperfect yardstick that reflects work accomplished per employee. In theory, this allows even the smallest of nations to compare themselves with larger ones. In practice, however, productivity is tough to measure, especially in the service sector. And governments tend to calculate it in slightly different ways. U.S. productivity, for example, is usually measured in output per hour, whereas European productivity is usually measured in output per employee. Despite this, there's a good deal of international data on how countries are performing in terms of productivity.
It is often assumed that the U.S. has the world's most productive workforce, and by some measures it does. The International Labor Organization measures labor productivity as the value added per person employed, in 1990 U.S. dollars. Using this standard, the U.S. economy produced an average value of $54,879 per worker in 2000. The nearest competitor to the U.S. was Belgium, at $53,338 per worker, a difference of more than $1,500 per employed person. The difference between the U.S. and Canada was almost $10,000 per worker, and the difference between the U.S. and Japan exceeded $14,000. When productivity is measured as value added per hour worked, however, French workers produced $33.71 in value per hour in 2000, compared with U.S. workers at $32.84. Belgian workers also outpaced the U.S. in value per hour worked, averaging $32.98.
As for labor productivity growth, the U.S. has tended to outpace most nations in the European Union (EU) in recent years. Between 1995 and 2000, labor productivity in the U.S. grew by an average of 2%, compared with 1.4% in the EU, according to data from The Conference Board. Even in 2001, only two nations in the EU had higher productivity growth than the U.S.: Greece and Ireland, both of which posted 3.5% labor productivity growth.
Another area of the world enjoying impressive productivity growth is Russia. "Labor productivity and efficiency levels have been Russia's biggest problems since the Soviet era," says Ruben Vardanyan, CEO of Troika Group, a Moscow financial services firm. Yet largely thanks to improvements made in newly privatized companies, Russian industry has posted productivity gains of 31% since the August 1998 collapse of the ruble, according to a recent study by Peter Boone, head of research at Moscow brokerage Brunswick UBS Warburg.
Any international claim to the fastest labor productivity growth, however, might well go to China. Between 1990 and 2000, China's nonfarm productivity rose at an annual rate of 8.1%, according to Morgan Stanley economist Andy Xie, a leading expert on Asian economic trends. During the same decade, China's agricultural productivity rose at a brisk 4.8% annual rate. How is China raising its productivity rates so quickly? Xie points out that China is in transition from an agricultural to an industrial economy, with its greater use of manufacturing technology and therefore greater efficiencies. "Because the output of a worker in industry and service is 4.6 times that of a worker in agriculture, every one percentage point of labor redistributed from agriculture to industry/service improves labor productivity by 1.2 percentage points," Xie writes. In 1990, 43% of the Chinese labor force worked in nonfarm industries; by 2000, the figure had risen to 54%. If the trend continues, Xie predicts, 62% of Chinese workers will be employed in nonagricultural jobs by 2010, which means that its productivity figures will continue to rise.
As a result, China's gross domestic product (GDP) will rise along with its productivity rates, lifting more and more Chinese out of poverty. David Dollar and Aart Kraay, economists at the World Bank's Development Research Group, explain that across the globe, incomes of the poor grow at around the same rate as GDP. Dollar and Kraay observe that the incomes of the poor in China have risen dramatically along with productivity growth. In fact, they insist, China's progress in reducing poverty should be hailed as "one of the most dramatic successes in history."
For more information on the International Labor Organization study, "Key Indicators of the Labor Market 2001-2002," see
http://www.us.ilo.org/news/prsrls/20010831_kilm.html
In 2002, The Conference Board published "Performance 2001: Productivity, Employment and Income in the World's Economies," which can be ordered from The Conference Board Web site at
http://www.conference-board.org/products/researchreports/dpubs.cfm?id=486
For more information on international comparisons of productivity, see
http://www.bls.gov/fls/flsprody.htm
The following articles were used in the creation of this TrendWatcher:
Belton, Catherine. "A Gleam of Hope for Russia Inc." BusinessWeek, June 17, 2002, p. 48.
Dollar, David and Aart Kraay. "Spreading the Wealth." Foreign Affairs. Global NewsBank. February 2002, pp. 120-133.
"Starting to Work." The Economist, May 18, 2002, pp. 72-73.
Xie, Andy. "Measuring China's Economy: An Inside Glimpse of Capital Investment, Deflation and, of All Things, a Strange Agricultural Productivity Boom." The International Economy. IAC Business Index. Spring 2002, p. 46.