LABOUR:Productivity Growth Eludes Developing Economies

LABOUR: Productivity Growth Eludes Developing Economies - ILO
Katrin Dauenhauer - IPS 9/1/03

WASHINGTON, Sep 1 (IPS) - The world's workers were increasingly productive in 2002 but that growth was concentrated in industrialised economies, according to a new study by the International Labour Office (ILO) released Monday.

Productivity in Africa and Latin American economies has declined since 1980, adds the ILO's annual 'Key Indicators of the Labour Market'.

"As a general trend, we've seen different productivity growth rates between developing and developed countries. This is for many different reasons, including the failure of overall economic strategies, civil unrest or lack of investment, and has to be more looked at on a case by case basis," said Lawrence Jeff Johnson, head of the ILO's labour market economic unit that produced the study.

"However, what becomes clear is that there is no magic solution to improving productivity," he told IPS on Friday.

U.S. productivity accelerated in 2002, surpassing Europe and Japan in annual output per worker for the first substantial period since World War II and widening the productivity gap with the rest of the world.

In contrast to European and other industrialised countries, the U.S. 'employment-to-population ratio' -- measuring the proportion of people in the population who are working -- declined by 1.6 percent (from 64.3 to 62.7 percent) but the U.S. economy registered higher employment and productivity growth rates than the European Union (EU).

The KILM examined 20 key indicators of the labour market, including productivity, unemployment, underemployment, employment and hours worked.

For the first time, it also examined agricultural productivity, revealing that the sector, while rapidly declining in developed economies, remains the primary employer in many developing economies, at times accounting for more than 70 percent of employment.

Yet, productivity levels in agriculture remain higher in developed economies. In the United States, for example, an agricultural worker produces over 650 times more than an agricultural worker in Vietnam, the report states.

"Our findings show that we cannot ignore the agricultural sector and that we must find ways to become more productive in order to feed the population of developing countries," Johnson said.

"This also involves issues of regional and global trade, as will be discussed in the upcoming WTO (World Trade Organisation) ministerial conference in Cancun."

"Of course, one also has to keep in mind that improving productivity runs the risk of decreasing employment, but as seen in many other countries, labour can be moved to other sectors," he added.

It is important to not only increase productivity but also to improve the well-being of people by establishing productive forms of employment, the report emphasises.

"The overall global trends show that growth is not enough," said ILO Director-General Juan Somavia in a statement. "We must make productivity growth and job creation key objectives and pursue policies that combine these objectives with decent work."

Though productivity per person grew overall in 2002, the decline in the growth of gross domestic product (GDP) that began three years ago and was aggravated by the 9/11 terrorist attacks continues. That slowdown is reflected in a parallel decrease in annual hours worked per person in most countries worldwide, says the report.

Within the last two years, hours worked in the United States dropped from 1,834 to 1,825. The same trend is reported for Norway (from 1,380 to 1,342), France (from 1,587 to 1,545) and Germany (from 1,463 to 1,444).

Worldwide, South Koreans worked the longest hours of all employees, in economies for which data were available -- 2,447 hours in 2001, 26 percent more than people in the United States and 46 percent more than workers in the Netherlands, which registered the lowest of all economies.

"In all developing Asian economies where data were available, people historically worked more than in industrialised economies. This is a typical sign for developing economies as they often compensate for the lack of technology and capital with people working longer hours," the report said.

The report also provides information on creating and maintaining jobs.

Most industrialised economies, with the exception of Germany and Japan, increased output and nominal employment during the period 1999-2002.

In a number of countries within the EU, unemployment rates actually decreased, though unemployment rates in Europe have generally been higher than those in the United States, the report states.

In Latin America, the report shows mixed results over the past decade. While Argentina, Chile, Colombia and Uruguay experienced declines in their employment-to-population ratios, countries like Peru and Venezuela saw increases.

In Asia, the employment-to-population ratio declined, with Thailand registering one of the highest declines in the region, from 77.5 to 67.5 percent.

But even with those declines, Asian economies typically record high employment-to-population ratios. With the exception of Sri Lanka, all of Asia's major economies recorded employment-to-population ratios of between 50 and 70 percent.