• The United Kingdom showed a strong improvement in GDP growth (up from 1.7 percent in 2013 to 2.8 percent in 2014), but this did not translate into labour productivity growth as the economic recovery in the UK was primarily fuelled by the creation of more jobs and longer working hours.
• UK’s level of output per hour remains well below that of its main continental counterparts, France and Germany.
• Portugal and Greece seem to be the least productive countries, while Luxembourg and Norway are leading the way.

Labour productivity is a revealing indicator of several economic indicators as it offers a dynamic measure of economic growth, competitiveness, and living standards within an economy.

It is the measure of labour productivity which helps explain the principal economic foundations that are necessary for both economic growth and social development.

Labour productivity = Volume measure of output / Measure of labour input use.

Activia Training, a UK-based corporate training provider, has recently conducted the following study and built a very interesting interactive map that compares 4 different factors:

Annual hours worked per worker; Labour productivity per person employed; Labour productivity per hour worked; Percentage of growth of Labour Productivity per hour worked.

The volume measure of output reflects the goods and services produced by the workforce. Numerator of the ratio of labour productivity, the volume measure of output is measured by gross domestic product (GDP), which represents the value of all final goods and services produced within a country in a year. The GDP per capita indicates the average share of the economy per person, if every single individual was working.

If we divide by the average number of hours worked in the country, we get the productivity per worker per hour. Labour productivity per hour worked is calculated as real output (deflated GDP measured in chain-linked volumes) per unit of labour input (measured by the total number of hours worked). Measuring labour productivity per hour worked provides a better picture of productivity developments in the economy than labour productivity per person employed, as it eliminates differences in the full time/part time composition of the workforce across countries and years. Another way to calculate it is to take the GDP (PPP) per capita per hour and divide it by the employment rate, which should give exactly the same result, if the stats used are the same. We have put together some interesting data about productivity across the world.

The United Kingdom showed a strong improvement in GDP growth (up from 1.7 percent in 2013 to 2.8 percent in 2014), but this did not translate into labour productivity growth as the economic recovery in the UK was primarily fuelled by the creation of more jobs and longer working hours. Growth in total hours in 2014 increased significantly from 1.8 percent to 2.7 percent, resulting in only negligible improvement in labour productivity growth of 0.1 percent after a substantial contraction in 2012 and 2013. One of the concerns is that many of the UK companies are comparatively unproductive. In fact, UK’s level of output per hour remains well below that of its main continental counterparts, France and Germany.

So why do France and Belgium have similar GDP per capita to less productive countries like the UK, Germany or the Netherlands? This can be explained by the very high percentage of fairly recent (last 3 generations) immigrants from developing countries, who are usually poorly educated and have much higher unemployment rates.

In comparison, foreign residents in the UK tend to be much better educated, as the UK attracts more intellectual job-seekers (in IT, finance, and even medicine), as well as more skilled workers (e.g. from Eastern Europe). It is not a new phenomenon; many Indian immigrants in the 1950’s were medical doctors or lawyers. Portugal and Greece seem to be the least productive countries, while Luxembourg and Norway are leading the way.