These are the OECD’s most productive economies

(Unsplash, 2019)

This article is brought to you thanks to the collaboration of The European Sting with the World Economic Forum.

Author: Johnny Wood, Writer, Formative Content

Romania boasts the highest productivity of leading world economies, according to the latest available data from the Organization for Economic Co-operation and Development (OECD).

The eastern European nation recorded the highest “GDP per hour” rate of any OECD country in 2017, at $142.1 (converted to US dollars based on 2010 PPP), closely followed by Ireland, with Turkey in third place. At the other end of the scale, the productivity rate for Greece was just 92.8, due in part to factors like declining economic competitiveness and low rates of participation in the workforce.

So what does all this mean? Gross Domestic Product (GDP) per hour records the efficiency of labour and how well it combines with other factors used in the production process. While this sounds like a measure of the physical effort an individual dedicates to getting a job done, the reality is very different.

Output levels depend on a combination of factors, such as capital expenditure, technological sophistication and an operation’s economies of scale.

While increased productivity goes hand in hand with a healthier economy and improved living standards, there is a big difference between using resources more productively and growth at any cost.

What’s trending?

With a few exceptions, the productivity of most OECD countries has been on an upward trajectory in recent years. Emerging economies, especially Eastern European nations like Romania, Poland, Latvia and Bulgaria, have experienced a sharp rise in their productivity trend over time.

In Romania’s case, the productivity boom was due in part to labour shortages created by millions of workers leaving the country in search of higher pay. The lack of new workers put pressure on companies to boost the productivity of existing labour.

Developed economies like the UK, Sweden and the US show a more gradual increase in productivity levels, more in line with the OECD average.

Look to the future

Employees, businesses and national economies spend a large part of their time trying to solve the productivity conundrum: how to get more done in less time. But is higher output always a good thing?

In some rapidly industrializing economies, growth is being pursued with little consideration for its environmental cost. Climate change, pollution and biodiversity loss are high prices to pay for a short-term boost to output, which could jeopardize future growth and ultimately put humanity at risk.

According to the Global Footprint Network, since the 1970s humanity has been using more resources each year than the planet can regenerate, a situation it describes as “ecological overshoot”. The network estimates that humans use the equivalent of 1.7 Earths of resources to meet our needs and absorb our waste.

While the international community is fostering change, the process is happening too slowly to meet the target of restricting global warming to within 2°C by 2100.

Greater productivity is strongly linked to economic growth, and forward-thinking companies and policymakers are adopting practices aimed at generating sustainable growth.

The World Economic Forum’s Global Competitiveness Report 2018 highlights the importance of policies that promote the efficient use of the planet’s resources, reduce waste and encourage innovation.

Fourth Industrial Revolution technologies offer unprecedented scope to boost global productivity. Innovation opens up opportunities to foster sustainable growth that respects the environment.