Euro area's problem in one chart? Might sound like a bit of an over-simplification, but here is a summary of labour productivity index simply constructed as real GDP per employee:
The chart shows several facts:
- Euro area labour productivity is currently low, despite massive uplift in unemployment (which should have increased output per employee more substantially).
- Euro area labour productivity has grown faster than that in the U.S. in the period of 1986-1995, but has been growing at a slower rate for some twenty years now.
- Post-2010, euro area productivity has been lagging all groups of advanced economies.
Now, remember, no one talks as much about carrying out labour markets reforms as euro area leadership. In a way, this might be warranted, given poor performance, but in a way it also might suggest that the reforms are not working. After all, since the start of the Great Recession, allegedly, we had plenty of these reforms, and we had a 'productivity-enhancing' rise in unemployment, reduction in labour force and wages moderations galore. And productivity is not really expanding much. Secular stagnation, anyone?
