Labour productivity stagnates in 2024

Labour productivity is a measure of the economic performance and efficiency of output per hour worked. It is expressed as the value added per hour worked, and is a key economic indicator: growing labour productivity leads to increased prosperity in a country. In 2024, the value added of the commercial sector increased by 1.0 percent, while the number of hours worked increased by 1.1 percent. Collectively, this means a 0.1 percent decline in labour productivity.

Financial services contributed the most to decline in productivity

Labour productivity growth can be achieved in two ways. First, by increasing the average productivity of the underlying sectors, a phenomenon known as autonomous growth. In 2024, however, this was not the case. The financial services sector, construction and energy supply made the largest negative contributions to productivity, while specialised business services and transportation and storage made the most positive contribution.

More hours worked in highly productive sectors, in relative terms

Total labour productivity can also increase if more hours are worked, in relative terms, in highly productive sectors. Conversely, if more hours are worked in lower-productivity sectors, total labour productivity will decrease. These types of effects are called structural effects.

In the Netherlands, for two consecutive years, relatively more hours have been worked in highly productive sectors such as energy supply and financial services. Despite the decline in 2024, labour productivity in these sectors remains higher than average. In contrast, productivity in the rental, leasing and other business services sector was below average, and fewer hours were worked in this sector in 2024.

Lower multifactor productivity

Another way to look at the changes in labour productivity is to break it down into three factors related to capital goods: increased use of capital goods per hour worked (capital deepening), better-qualified personnel (labour composition effect), or other factors, such as economies of scale and technological progress (multifactor productivity).
In 2024, both capital deepening (0.1 percentage points) and the labour composition effect (0.3 percentage points) contributed positively to labour productivity. This means that more capital (such as machinery and computers) and better-qualified personnel were deployed per hour worked.

Nevertheless, labour productivity declined in 2024, due to a 0.4 percentage point decrease in the contribution of multifactor productivity. Improvements in multifactor productivity are generally seen as an indicator of technological progress and increased efficiency in the use of resources in the production process.