France, UK productivity puzzle
By Arnold Kling
A French employee works 30% fewer hours than a British worker, and a much smaller percentage of the French population than the British works at all, yet total French output is very nearly equal in value to British.
I checked the CIA world factbook, and in terms of total population and total GDP, France and the UK are about equal. So what explains the lower labor input of France? Some possibilities:
1. Higher capital/labor ratio. If it’s more troublesome to hire labor, you substitute capital. But it seems to me that it would take tons and tons of capital to make up for the difference in labor input.
2. Higher labor quality. Remember, the UK includes Ireland and Scotland, and the unemployed French workers probably are not their most high-output individuals.
3. Measurement problems. For example, is farm output in France over-estimated because of their agricultural policy? Also, a huge percent of their labor force and GDP is in government. Is the value of their output measured accurately?
I lean toward (3) as the explanation. Comments welcome.
UPDATE: I decided to look up some data. The share of public sector employment in total employment is about 20 percent in the UK and about 22 percent in France. The share of public sector GDP in total GDP is about 43 percent in the UK and about 54 percent in France. So, if both countries had $100 in GDP and the UK used 100 workers and France used 75 workers, we would have
–UK public sector 20 workers, $43 in GDP; private sector 80 workers, $57 in GDP
–France public sector 16.5 workers, $54 in GDP; private sector 58.5 workers, $46 in GDP.
In that case, private sector GDP per worker = .71 in UK, .78 in France. So the difference is not nearly as large in private sector GDP. What I am saying here is that most of the French “productivity miracle” is in the public sector, where the measure of output might be considered suspect.