MRO Magazine

New international report says U.S. leads the world in labour productivity

Geneva, Switzerland -- While productivity levels have increased worldwide over the past decade, gaps remain wide be...


Human Resources

December 24, 2007
By MRO Magazine

Geneva, Switzerland — While productivity levels have increased worldwide over the past decade, gaps remain wide between the industrialized region and most others, although South Asia, East Asia, and Central and South-Eastern Europe (non-European Union) and the Commonwealth of Independent States (CIS) have begun to catch up, the International Labour Office (ILO) said in a new report published in November 2007.

The ILO report, entitled “Key Indicators of the Labour Market (KILM), fifth Edition” indicates that the U.S. still leads the world by far in labour productivity per person employed in 2006 despite a rapid increase of productivity in East Asia where workers now produce twice as much as they did 10 years ago.

What’s more, the report also shows that the productivity gap between the U.S. and most other developed economies continued to widen. The acceleration of productivity growth in the U.S. has outpaced that of many other developed economies: With US$63,885 of value added per person employed in 2006, the United States was followed at a considerable distance by Ireland (US$55,986), Luxembourg (US$55,641), Belgium (US$55,235) and France (US$54,609).

However, Americans work more hours per year than workers in most other developed economies. This is why, measured as value added per hour worked, Norway has the highest labour productivity level (US$37.99), followed by the United States (US$35.63) and France (US$35.08).

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Increase in productivity is mainly the result of firms better combining capital, labour and technology. A lack of investment in people (training and skills) as well as equipment and technology can lead to an underutilization of the labour potential in the world.

“The huge gap in productivity and wealth is cause for great concern,” said ILO director-general Juan Somavia. “Raising the productivity levels of workers on the lowest incomes in the poorest countries is the key to reducing the enormous decent work deficits in the world.”

In East Asia where productivity levels showed the fastest increase, doubling in 10 years, output per worker was up from one-eighth in 1996 to one-fifth of the level found in the industrialized countries in 2006. Meanwhile, in South-East Asia and the Pacific, productivity levels were seven times less and in South Asia eight times less than in the industrialized countries, the report reveals.

In the Middle East, and Latin America and the Caribbean, the value added per person employed is nearly three times less than it is in the developed economies; in Central and South-Eastern Europe (non-EU) and CIS, the level is 3.5 times less, and four times less in North Africa. The widest gap is observed in sub-Saharan Africa, where the productivity level per person employed is one-twelfth of that of a worker in the industrialized countries.

SUBSTANTIAL DECENT WORK DEFICITS

This fifth edition of the KILM provides more insight and new measurements on what the ILO calls “decent work deficits” worldwide. Decent work is productive and delivers a fair income, security in the workplace and social protection for families as well as allowing people to express their concerns, organize and participate in the decisions that affect their lives.

“Hundreds of millions of women and men are working hard and long but without the conditions they need to lift themselves and their families out of poverty; they risk falling deeper into poverty. Releasing their underutilized capacities by raising their productive potential must be at the top of the international development agenda,” said Somavia.

According to the KILM, 1.5 billion people in the world or one-third of the working-age population are “potentially underutilized.” This new estimate of labour underutilization comprises the 195.7 million unemployed people in the world and nearly 1.3 billion working poor who live with their families on less than US$2 per day per family member. Whereas the unemployed want to work but lack the opportunity to do so, the working poor are working but do not earn enough to escape poverty.

The report also estimates that half of all women and men employed are considered vulnerable to poverty. Viewed in a global perspective most of these women and men work in the informal economy and carry a higher risk of being unprotected, without social security and without a voice at work. Over 70% of the workers in sub-Saharan Africa and South Asia are in such vulnerable employment.

The report also notes that besides the underutilized labour force a large number of people — about one-third of the working-age population worldwide — are not participating in labour markets at all. For the past 10 years this inactivity rate has remained much higher for women than for men, with only two out of 10 men of working age inactive compared to five out of 10 women. This shows that a large female labour force potential remains untapped.

The KILM, through publishing 20 indicators, covers many facets of decent and productive work including: type and size of employment, the lack of work and the characteristics of jobseekers, education, wages, earnings and compensations costs, labour productivity and working poverty. Taken together, the KILM indicators give a strong foundation from which to examine the relationships between poverty, decent work deficits and labour underutilization.

For more information, please contact Laetitia Dard at dard@ilo.org, +4122/799-8272 or +4178/685-0117, or the Department of Communication at communication@ilo.org, +4122/799-7912.