Productivity Remains High in China, U.S., Japan, India

The gap between how fast productivity is growing in the European Union versus growth in the U.S widened for the 10th consecutive year in 2004, according to the Conference Board.

At 6.3 percent annually, productivity growth is very high in China, according to the latest available figure from that country (where economic data is harder to come by and is often open to debate). It’s also high in India at 3.8 percent growth in 2004, the U.S. at 3.1 percent and Japan at 3.6 percent. Latin America and Africa generally are experiencing low rates of productivity.

Productivity growth in Europe, while on the rise, is still only about 1.6 percent, significantly less than in the U.S.

Robert McGuckin, director of economic research at the Conference Board, says that as Europe rebuilt after World War II, the gap between Europe and the U.S. was much smaller than now.

That stopped around 1995. He attributes the change partly to regulations, particularly in Western Europe, that have made it difficult for companies to do business. These include restrictions on land use, store hours and more. Many companies operate globally but avoid Western Europe. “Europe needs some structural reform,” he says.

McGuckin says that U.S. companies have pioneered new ways of running businesses. Fifty years ago, Procter & Gamble, for example, would just “shove the goods out the door. Inventory was a problem.”

Now, Wal-Mart and other companies have made a science out of buying and selling goods, first using software and later the Internet. These practices have yet to penetrate the financial and services sectors as much in Europe as they have in the U.S.