2024-04-24 02:01:18
Productivity growth is, by far, the biggest determinant of our future prosperity. It should therefore, at all levels, be at the top of the priorities of future governments.
The start of the electoral campaign is gradually underway with the long litany of the usual promises: early retirement, reduction in working hours, higher salaries, increase in allowances/allowances, lower taxes, additional investments in the sustainable transition, (more) healthy public finances… Surprisingly, although emanating from different political horizons, these promises all pass in silence a particular element: the need for higher productivity growth which remains the essential factor of our future prosperity.
Our prosperity is essentially determined by number of professionally active people and the quantity of goods and services produced by each of them (productivity). An increase in our productivity therefore requires us to provide more with the same input. It is not a question here of working more or longer, but of work “smarter”with more efficient tools, more powerful computers and software, better organization and fewer restrictive rules…
Any additional prosperity will have to come primarily from productivity growth.
Due to demographic dynamics, the increase in the working age population will practically cease in the short term. Any additional prosperity will therefore have to come primarily from productivity growth. The Study Committee on Aging estimates that in the coming decades, 90% of the growth in our prosperity must result from this growth. In short, everything we want to achieve in the years to come in terms of salary increases, early retirement, increased pensions, additional investments in health care, climate transition… must absolutely be financed by productivity growth more sustained.
The engine of our prosperity is stalling
The importance of productivity growth to our future prosperity cannot be overemphasized. Gold, it has been slowing down for decades and seems to be almost at a standstill. Although this trend is noticeable in most Western countries, the growth of productivity, however, slows further in Belgium than in countries comparable to ours. For example, over the past ten years, labor productivity in countries such as Denmark, Sweden and the United States has increased more than twice as fast as in Belgium.
If we wish to consolidate our prosperity, absorb the costs of aging, strengthen our purchasing power, invest in the sustainable transition, in short, keep the electoral promises made, an increase in productivity is necessary.
If we fail to reverse this downward trend, future generations will be worse off than we are now. In such a scenario, for example, our public debt will quickly become unsustainable. What’s more, with such rates of productivity growth, we will soon no longer be able to afford the bill of aging.
In the years to come, if we wish to further consolidate our prosperity, absorb the costs of agingstructurally strengthen our purchasing powerinvest in transition durablein short, if we want to keep the electoral promises currently made to us, an increase in productivity is necessary. The entire electoral campaign should therefore focus on this pointor at least focus on the economic-financial plan.
A vast productivity program is therefore necessary. Ten points, in particular, are important in this regard:
1. Education and training
The level of education of the working population is a determining factor in the potential productivity of workers. The decline in education levels and limited commitment to continuing education are worrying. We are also witnessing a significant waste of talent: some of our young people (1 in 8) leave school without qualifications. There quality of teaching and the broader framework of training need to be improved.
2. L’innovation
THE public spending on research and development (R&D) have a leverage effect on productivity growth. Belgium already achieves fairly good results in this regard, but it can still aim higher. The emphasis should be placed on a greater diffusion of innovation throughout the economy and on better valorization of research efforts.
Entrepreneurial dynamism remains more limited in Belgium than in most other countries. It can be improved by removing all kinds of obstacles to entrepreneurship.
3. A more favorable entrepreneurial climate
A healthy entrepreneurial dynamic, with many start-ups and the disappearance of less productive companies, is positive for productivity growth. Start-ups and scale-ups, for example, are better able to pursue new ideas in the economy. This entrepreneurial dynamism remains more limited in Belgium than in most other countries. It can be improved by removing all kinds of obstacles to entrepreneurship.
4. Ecosystems
To ensure that innovation and entrepreneurial dynamism reach their full potential, a close cooperation between stakeholders is essential. Ecosystems that enable large multinationals, small businesses and start-ups, knowledge centers and governments to reinforce each other are engines of productivity growth. THE circular ecosystems also have significant potential. Governments can facilitate this environment.
5. Productive public investments
All Belgian governments have systematically underinvested for decades, while public investment remains potentially one of the most powerful tools to boost productivity provided that it is a question of real investments which strengthen production capacity of our economy, and not permanent public spending disguised as “investments”. Catching up with public investments in areas such as mobilitythe digitizationTHE energy infrastructure… s’impose.
6. Digitalization and AI
Digitalization is by far the most effective way to significantly boost our productivity growth over the coming decades. But it won’t happen alone. Realizing the full potential of digitalization will require, among other things, investments in digital infrastructure and massive efforts of digital skills training among the population.
7. Internationalization
Companies that are exposed to international competition are on average significantly more productive than those which operate solely on their domestic market. This implies a permanent openness to international opportunities, especially in a world where globalization and international trade are increasingly called into question. Furthermore, we are making it far too difficult for ourselves to attract international talent.
The Belgian system is far too rigid, too focused on preserving the status quo of the labor market. This hinders productivity growth.
8. Competition in the domestic market
Low competition helps destroy innovation and productivity growth. According to OECD analyses, there are too many barriers in Belgium which prevent healthy competition. It is about regulationism: abundant price control by the government and too many ineffective rules imposed on industry, the financial sector, transport, commerce and certain services. Rules that are too extreme and restrictive should be gradually repealed.
9. A dynamic job market
In ideal circumstances, the labor market should direct people to the most productive firms, but the Belgian system is far too rigid, too focused on preserving the status quo of the labor market. This hinders productivity growth. A bigger mobilitya bigger salary differentiation and a larger flexibility (on both sides) are necessary to support productivity growth.
10. A sustainable transition
The sustainable transition consists of producing more (or the same thing) with fewer inputs. More innovation and improved efficiency should be at the heart of a successful sustainable transition, which will also lead to increased productivity in the long term.
Collective of signatories from the Belgian academic, banking and economic world
Filip Abraham (KU Leuven et Vlerick Business School)
Johan Albrecht (UGent et Itinera)
Frederik Anseel (UNSW Business School)
Paul Belleflamme (UCLouvain)
Hans Bevers (Degroof-Petercam)
Jan Bouckaert (University of Antwerp)
Kris Boudt (UGent et VUB)
Etienne de Callataÿ (Orcadia Asset Management)
Bertrand Candelon (UCLouvain)
Koenraad Debackere (KU Leuven)
Marion Debruyne (Vlerick Business School)
André Decoster (KU Leuven)
Hans Dewachter (KBC et KU Leuven)
Peter De Keyzer (Growth Inc)
Koen De Leus (BNP Paribas Fortis)
Marc Deloof (University of Antwerp and Antwerp Management School)
Charlotte of Montpellier (ING)
Selien De Schryder (UGent)
Marc De Vos (Travel and UGent)
Marcia De Wachter (independent director and Chair MeDirectBank)
Lode De Waele (Utrecht University)
Yannick Dillen (Vlerick Business School)
Fouad Gandoul (political scientist)
Axel Gautier (HEC Liège)
Simon Ghiotto (KU Leuven and Itinera)
Dirk Heremans (KU Leuven)
Jean Hindriks (UCLouvain and Itinera)
Philippe Ledent (ING Belgium)
Glenn Magerman (ULB and Oxford Martin School)
Sophie Manigart (Vlerick Business School)
Mikael Petitjean (UCLouvain)
Willem Sas (University of Stirling)
Leo Sleuwaegen (KU Leuven)
Kristien Smedts (KU Leuven)
Bart Van Craynest (Voka)
Ivan Van de Cloot (Merito Foundation)
Vincent Vandenberghe (UCLouvain)
Peter Vanden Houte (ING Belgium)
Johan Van Gompel (KBC and University of Antwerp)
Joost Van Meerbeeck (indépendant administrator at Sustinvest)
Jacques Vanneste (University of Antwerp)
André Van Poeck (University of Antwerp)
Caroline Ven (Pharma.be and National Productivity Council)
Gertjan Verdict (KU Leuven)
Frédéric Vrins (UCLouvain)
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#Growing #productivity