Productivity

Description

(from a discussion in the context of the proposal for a European Green New Deal by the European Commision in 2020)

Karl Aiginger:

"Productivity means more output per input. We set aside how output is measured, as this may be a task for specialists. But what is all-important is that productivity can be considered more output per worker, more output by capital investment, or more output per energy and resource input. All these partial productivities, together with a residual that is understood to be the effect of the innovation system, yield ‘total factor productivity’. Let us also set aside the factor capital which is again difficult to measure (though rules exist).

The problem is that in this Communication, productivity is implicitly understood to be the increase in output per worker, which is a partial aspect of labour productivity. This term has been at the centre of policy for the last decades, and it still preoccupies the thinking of misguided experts in the European Commission. They do not even realise its advantages and disadvantages, especially when the increase in labour productivity is larger than that of resource productivity.

The advantage of rising labour productivity is that it could lead to more leisure, and if this is not welcomed, it enables higher output and higher wages. However, its disadvantage is that if it is not accompanied by higher resource productivity, higher output will raise emissions and accelerate climate change. And it is a factor increasing the necessity for growth, if unemployment is not negligible.

Alternatively, increasing output per resource input allows for higher output without higher emissions (Aiginger and Rodrik 2020). If this ‘nice cousin’ of labour productivity is strong enough, we can enjoy higher wages and well-being together with strictly lower emissions, which is called ‘absolute decoupling’.

The goals of the Paris Agreement require deep decoupling. Without strongly increasing resource productivity, higher output will undermine the fight against climate change." (https://www.nakedcapitalism.com/2020/01/a-european-green-deal-will-not-work-without-refocusing-productivity.html)