Labour productivity = Volume measure of output / Measure of labour input use
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 by 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 developments in the economy than labour productivity per person employed. 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% in 2013 to 2.8% 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% to 2.7%, resulting in only negligible improvement in labour productivity growth of 0.1% after some years of substantial contraction in 2012 and 2013. One of the concerns is that many of the UK companies are comparatively unproductive. In fact, the 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 professionals, such as doctors or lawyers.
Portugal and Greece seem to be the least productive countries, while Luxembourg and Norway lead the way.
In the interactive map below you can compare 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
(Data comes from The Conference Board and we are showing values from 2015.)
This data, combined with the recent findings that the UK ranks 22nd in Europe for investment in training the workforce, indicates that British economic stability might be eclipsed by the growth aspirations of other nations both within and outside of the EU.
Official reports from the European Commission and Eurostat show that in the UK, the expenditure on CVT courses per employee is one of the lowest in the EU. Countries such as Belgium, France and the Netherlands are leading the way, while only five countries invest less money in training than the United Kingdom. This flagging commitment to training may jeopardise the United Kingdom's economic stability and the power of its workforce.
Training a workforce is a fundamental part of staff development, and a contributing factor to achieving overarching business goals. Using a combination of training types may be the most effective way to increase employees’ productivity, especially as it depends on their skill, the quality of technology available, and effective management. Put simply, productivity can be raised through training, investing in new or more advanced equipment, and better staff management.