Labour productivity stagnant for second year running

03/11/2003 10:00

Just as in 2001 labour productivity in the market sector grew only slightly in 2002, at an average 0.2 percent. Such a low growth rate in production per labour year for two years in a row is very rare.

Decrease in production and labour volume

The slight growth in labour productivity in 2002 is the result of a decrease in the volume of value added and a slightly stronger decrease in labour volume.

Such a low growth rate is uncommon in itself, but very rare for two years in a row. In 1996 the growth of labour productivity also stagnated. In that year there was an opposite development: employment grew quickly, and was accompanied by an equivalent growth of value added.

Labour productivity market sector

Strong growth in telecom production

In 2001 and 2002 labour productivity was low in the manufacturing industry (0.1 percent on average) and in financial and corporate services (0.5 percent on average). Growth was relatively high in transport and communication (2.4 percent on average). In the telecom sector production rose by more than 8 percent on average, while employment did not increase. New technology and cost reduction pushed up efficiency in this sector. In trade and in the hotel and restaurant sector labour productivity fell by 1.2 percent in 2001 and 2002.

Growth and stagnation

The fluctuations in the growth of labour productivity are caused by the fact that the developments in production and employment do not coincide.

Employment usually reacts with a delay to cyclical developments. Labour productivity grew by no less than 3.1 percent in 1994, the year of economic recovery, as the economy grew without employment increasing. Only in 1995 did employment begin to pick up again. Production and employment grew at the same rate in 1996. The latter was caused mainly by the strong increase of labour input in financial and corporate services.

In 2001 the growth of labour productivity stagnated in the market sector as economic growth dropped while labour input increased by 0.7 percent. In 2002 economic prospects deteriorated further and employment also decreased.

Labour productivity market sector, Europe and the Netherlands

In a European perspective the growth in labour productivity was high in the Netherlands. In the period 1996–2000 the five-year progressive average of labour productivity in the market sector was 1.7 percent. This is higher than the average labour productivity growth in all countries of the European Union (1.4 percent). This was mainly caused by higher economic growth in the Netherlands (3.7 percent) compared with the European Union (2.7 percent).

Frederik Heinsius and Gert-Jan van Steeg

Source: National accounts