Productivity is Not Everything - the Sources of Living Standards in an International Comparison

In light of the employment-policy successes of other countries, demands have been frequently voiced that employment be boosted, especially in the low-wage area, by wage-, social-, and tax-policy measures and that the accompanying lower increases in the productivity of the general economy be accepted. Critics of these demands point out that high productivity increases are the source of our prosperity. This argument is fundamentally correct but does not take into consideration that productivity increases only measure the change in output of those in employment but not the degree to which people are included in paid employment. But the higher the participation rate and the fewer people unemployed, the greater is the number of people who contribute to earning GDP and thus increasing average per capita income. The same applies to an extension of the annual working hours. The Conference Board, New York, has presented a cross-sectional comparison of the extent to which the individual components in the OECD countries contribute to per capita income. The results, presented in summary form, show that the good labour market performance of some countries was "purchased" at the price of a slowing in the growth of productivity.