By Norma Cohen and Economics Correspondent
The rate at which workers are raising their productivity in the world?s advanced economies fell by half in 2011, and is even starting to slow in some emerging economies, according to a report that suggests that unemployment is likely to rise in the months ahead.
According to the Conference Board, the global business organisation, productivity – defined as output per worker – in the most advanced economies fell from 3.1 per cent in 2010 to 1.6 per cent in 2011.
?Should the recession become entrenched in 2012, slow productivity will be the Achilles heel of even the best-performing economies within Europe,? the Conference Board said. Moreover, as a result of not using their productive resources fully, the advantage these advanced economies once had over less developed ones is disappearing. When total factor productivity – a measure of efficiency in all inputs to a production process – the gap nearly disappears. That is because of the very rapid investment in technology made in recent years.
Economies need output per worker to grow in order to maintain gross domestic product growth and most of the decline in 2011 reflected slower growth in GDP, itself a measure that includes output.
But the slowdown is also apparent among emerging and developing economies, which are much less efficient than those of advanced economies.
Productivity growth slipped to 4.7 per cent on average in 2011 from 5.5 per cent in 2010, although China?s growth rate of 8.8 per cent, down from 10 per cent in 2010, remains among the fastest in the world.
Bart van Ark, chief economist at the Conference Board, said that in the short term, the drop in productivity suggested that employers would cut labour to match the drop in overall output. ?But in the longer term, productivity gains come from technology innovation and investment,? he said.
Moreover, there are concerns that the focus on austerity by governments may exacerbate the loss of productivity because without expenditure on new technology, any gains will be limited. ?With calls for austerity, you have to be cautious not to cut the investments in new technology that increase productivity,? he said.
Some economies that saw very weak or negative productivity growth in 2011 may see improvement in 2012, as the measure is based on the number of employed people.
In the UK, productivity growth is likely to rise by around 1.2 per cent, as austerity measures cut jobs, meaning that output per worker is slower.
? The Financial Times Limited 2012