Productivity comparisons across countries reveal that operational factors, such as scale and processes, influence productivity much more significantly than the level of education: this at least was the case in the year 1993. And the insights of past research by the McKinsey Global Institute (MGI) are still valid: for example, Sweden removed land and pricing barriers in order to raise its productivity in the retail sector, while in the rest of Europe productivity in the same sector did not increase so much. Small and medium-size businesses will certainly experience a productivity boost as mobile applications and cloud computing make it easier for them to be innovative. New organisational structures and streamlining of production, in conjunction with elimination of waste, also have positive implications for productivity - this according to an article on the mckinsey.com website.
Links to labour productivity
The researchers were interested in sources and triggers of growth in the past. Overall growth stemmed from two factors: an increase in the workforce and a rise in the average productivity of labour. This extensive piece of research succeeded in evaluating a large set of factors – manufacturing technology and operational conditions. Using the chosen methodology it was found there had been an average 3.8% GDP growth every year (since 1964). And more than one half of this annual growth was induced by an increase in labour productivity. The trend of the last 40 years has been for an increasingly larger proportion of GDP growth to be induced by increased labour productivity. This trend is clear especially in emerging markets.
Catching up with the best
The population in many countries is ageing and thus the pool of available workers in the next 50 years is forecast to expand only slowly. As a result, almost all future economic growth will have to come from increased productivity. Previous research by MGI suggests there will be huge growth opportunities if countries currently not at the top are able at least to approach the levels of the top performers. Even countries such as China and India, despite having managed to improve their productivity substantially, still lag behind the front-runners, such as the USA. Removing barriers to trade and direct foreign investment will also enable rapid increases in productivity of labour.
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