World Labor Productivity Growth Improves

Asia Continues to Lead the World, The Conference Board Reports

Newswise — Worldwide labor productivity growth is improving, despite political and economic crises in Asia and Russia, and significant economic slowdowns in Europe, according to a report by The Conference Board.

Global labor productivity growth was 1.8% for the 1995-2002 period, up from only 1% in the first half of the 1990s. But the rest of the world’s productivity level relative to the U.S. is just 21%. This translates into per capita income amounting to only just 19% of the U.S. level.

The Conference Board report is based on a comprehensive and regularly updated statistical database that now covers 97 countries. It includes more than 20 years of economic performance, revealing both productivity levels (GDP per employee for all countries and GDP per hour for 36 more developed economies) and growth rates of GDP, labor input and productivity. The report also measures average per capita income and explains why, despite comparable levels of productivity, many countries are still far behind the U.S. on this key measure of economic strength and prosperity.

WHY ASIA REMAINS THE LEADER
Asia leads the world in labor productivity growth at 3.4% between 1990 and 2002. East Asia has rebounded strongly from its 1997-1998 crisis, registering solid 3.6% productivity growth since 1998. China continues to be a worldwide leader in labor productivity growth, at 6.5% annually. India leads South Asia with 3.4% productivity growth between 1995 and 2002. Japan experienced a significant acceleration in per hour labor productivity growth in 2003, increasing from 1.8% in 2002 to 2.9% in 2003. In addition, its labor-input growth was positive for the first time in 3 years.

Even Africa has returned to positive productivity growth, with improvements in almost all countries since 1995. But it still lags significantly behind most regions at 0.9%. Productivity growth in the Middle East has also been very slow – just 0.8% between 1995 and 2002.

“Gains in East Asia and the Pacific, which account for 42% of world employment, and South Asia, with 18% of world employment, are critical to future productivity advances,” says Robert McGuckin, Director of Economic Research at The Conference Board and co-author of the report with Bart van Ark, Consulting Director for The Conference Board’s International Economic Research.

Critical areas to watch for significant improvement in living standards are China, which has 28% of all the world’s jobs, and India (15%).

Both China and India have shown very strong productivity growth, with China’s at over 6%, driven by massive restructuring and privatization. India’s productivity is growing at 3.5%, spurred by reforms that have opened up competition and increased foreign investment. The gains in productivity were mirrored in the 10 new European Union members that have also been privatizing inefficient government enterprises at a rapid rate.

“China and India will have to continue the reform process, since their productivity levels are only 14% and 9% of the U.S. productivity levels,” concludes McGuckin. “Per capita incomes aren’t likely to rise without stronger productivity growth in these areas.”