Lhe labor productivity, i.e. the ratio between the quantity produced and the quantity of labor used, has fallen sharply in France since the first half of 2019: the drop in productivity has reached almost 3%, of which a third is due to the reduction in working time per employee (“per capita” productivity), and two-thirds to that of productivity per hour worked (hourly productivity). By comparison, per capita productivity fell even more in Spain (4%), while it remained more or less stable in Germany and rose by 1.5% in Italy.
This decline has, in France, both permanent and transitory causes. One of the latter is that companies have faced very high hiring difficulties since 2021. Even when growth slowed from the third quarter of 2022, they continued to create jobs to catch up with their previous hiring program. . A second of these transitory causes is that industry, and particularly the automobile industry, has experienced a significant decline in production; but companies in these sectors having anticipated a rapid recovery in their activity, they have not adjusted their level of employment accordingly. The mismatch between activity and workforce reduces productivity gains.
In addition to these transitory causes, however, there are permanent causes of the decline in productivity: French companies have had, for ten years, a net investment rate (excluding capital amortization) almost 40% lower than American companies; since 2010, their capital stock has thus increased in volume by 1.5% per year compared to 3% in the United States. We can also blame the growing share of the service sector in the economy to the detriment of industry (where average productivity is higher than in services); or even the “great resignation” resulting from a growing disengagement from the world of work. Therefore, three scenarios are possible.
Debt sustainability
A first scenario, which would see the continuation of the current trend, would have catastrophic consequences. Productivity would be more than 10% lower in 2030 than if it had remained at its pre-2019 level; with the effects of a gross domestic product (GDP) lower by 10 points and tax revenues lower by 5 points of GDP.
In this scenario, potential growth remains very low, since productivity gains from 2023 are assumed to be zero and the labor force is stable: growth might therefore only come from the rise in the employment rate. It is also likely that France, like the other countries of the euro zone, will return to positive real long-term interest rates, the European Central Bank being pushed into a more restrictive monetary policy by higher inflation due the cost of the energy transition and tensions in the labor market.
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