Productivity: truth and hoaxes
Giuliano Cazzola's comment on the working paper of the Tarantelli Foundation edited by Giuseppe Gallo on the relationship between wages and productivity
The Tarantelli Foundation has published an interesting working paper on the salary question (Giuseppe Gallo edited it), a theme at the center of the electoral campaign, with various proposals from the parties, which in general are wrong to restore the ancient principle of the Time of the Huns according to which wages were considered an independent variable. The following conclusions derive from these analyzes: wages are too low, they need to be increased, even at the expense of public finance.
The author instead works to identify the relationships between wages and productivity, starting to observe that the measurement (real added value per hour of work, made 100 in 1996) brings out, in the period 1996-2015, two groups of countries with of very different labor productivity: the Central Countries (Germany, Austria, France, Holland) have had a growth of between 59% in Germany and 101% in France; the peripheral countries (Italy, Spain, Portugal, Greece) recorded growth between 8% in Greece, and 48% in Portugal with Spain at 38% and Italy at 22%.
While in Central Countries, labor protection has always been positively associated with the increase in labor productivity and GDP growth; in the peripheral countries the organization effect was dominant, correlated to the absolute cost of labor, the development investment effect and the disturbance effect associated with current investments.
The survey therefore designs two alternative development models: the first with a focus on research strategy, technological, organizational, professional and managerial innovation of the company, high growth in labor productivity, market extension; the second that founds the competitive differential on lower wages and lower labor costs, weakened by the reduction in investments in innovation and the lower rate of growth in labor productivity.
Even the recent OECD data on percentage changes in wages in the period 1990-2020, underlines Gallo, although referring to national gross wage averages (not labor costs) and without a benchmark, see the Peripheral Countries in the last positions with a rate of average increase of 11.87% (Italy minus 2.90%), while Central Countries recorded + 28.30%.
As a result – continues the editor of the report, the countries that have adopted a long-term competitive model based on research, innovation, development with a high rate of added value and professional skills, constant growth in productivity, have recorded a higher rate of increase in GDP, significantly higher rates of wage increases, better protection of social cohesion.
Conversely, the countries that take on the lower cost of labor as an alternative competitive lever have lower growth rates, lower wages, greater tendency to social disintegration. Italy represents the evidential paradigm. Significantly lower labor costs and wage dynamics in comparison with the major European industrial countries, despite a much higher average annual working time (in 2021: Italy 1,668 hours against 1,349 in Germany and 1,490 in France).
Lower productivity: GDP per hour worked in 2021 equal to 42.4 euros in Italy; 59.2 in Germany, 57.1 in France, since the longer hourly duration of work in Italy is more than offset by the higher labor productivity in Germany and France.
In fact, it is not the quantitative dimension of work that is decisive, but rather the content of added value and technological and professional intelligence of production systems.
This resulted in the "lost twenty years" of the Italian economy (Mario Baldassarri, XV Report of the Associazione Economia Reale), or rather the stagnation of GDP in the period 2000/2019 (average annual growth rate 0.2%) and the accentuated loss competitive positions since in 2000 the Italian per capita GDP exceeded the EU average per capita GDP by 20 percentage points and in 2019 it was 6 percentage points lower; Similarly, in 2000 the Italian per capita GDP was 3 percentage points higher than the average of the Eurozone, while in 2019 it was 15 percentage points lower.
There is no doubt, therefore, that the model – Gallo argues – which focuses its competitive cards on less labor protection, low wages, low productivity is a losing model, condemned to oscillate between stagnation and recession, which tends to decline, with effects of social disintegration and the wearing down of the democratic institutions themselves.
At this point, the report cites a recent report by the Assolombarda Study Center ("Productivity in Italy. General framework and role of Lombardy and SMEs", Research n.11 / 2021), which according to Gallo would substantially confirm , the dualism of development models operating in the EU, albeit updated. The hourly labor productivity (measured by the ratio between GDP and hours worked) made 100 in 2000, in 2019 is: 104 Italy (107 Lombardy); 117 Spain; 119 France; 120 Germany. Disaggregating the measurement by production sectors, the picture would be substantially confirmed:
A) Manufacturing sector, made 100 in 2000, in 2019 the values are the following: 124 Italy, 138 Germany, 149 Spain, 156 France.
B) Sector of professional business services: 85 Italy, 91 Germany, 100 Spain, 101 France Sector.
C) ICT: 137 Italy, 134 Spain, 172 France, 174 Germany.
The survey by the Assolombarda Study Center also introduces the variable of labor productivity differences by size of firms, a key to understanding that the dualism of development models also operates within the Italian economy, resulting in a much more rigorous articulation of the analytical framework. In fact, it appears that low labor productivity is concentrated in micro-enterprises (0-9 employees), a very significant aggregate in Italy which represents 95% of enterprises (82% in Germany) and employs 45% of workers ( in Germany 19%).
In the Italian manufacturing sector, labor productivity in micro-enterprises, Germany made 100, is, in fact, 78.3, while in the 10-19 employees range it rises to 102.8 (better than the German one); in the 20-49 employees segment, it reached 118.7 (the best performance, above the index of both Germany, France and Spain); in the level of 50-249 employees Italy is, again, decidedly first at 128.8 (Germany 100, Spain 100, France 105.4); in the range of over 250 employees, Italy ranks at 97, Germany at 100, France at 95, Spain at 91.
As can easily be observed, with the exception of micro-enterprises, in SMEs and large Italian manufacturing enterprises, with the same size class, labor productivity is in line with and even higher than that of Germany and France and constantly better than that of Spain. Therefore, a high asymmetry of labor productivity emerges by size levels of enterprises which is divided into territorial imbalances and territorial differentials by sectoral composition.
It refers to the coexistence in the Italian economy of the dualism of development models. Where the fundamental discriminant is represented by the degree of integration in the global supply and value chains, distinct and superimposed on the historical gap between South and Center-North and transversal to the same territories, beyond the geographical location. Reading with this criterion – argues the curator – the industrial configuration of our country, supply chains emerge clearly (to limit ourselves to just one example) from Trieste to Turin, passing through Emilia-Romagna, Veneto, Lombardy, which, overall, can boast a manufacturing added value and labor productivity higher than the sum of Bavaria and Baden Wurtemberg and areas, prevalent, residual or extraneous to the chains of manufacturing and the global economy.
The lack of evolution of the excellences in the system explains the apparent contradiction between Italy second European manufacturing after Germany and Italy in the last European positions for GDP growth rate in the last twenty years, for labor productivity growth, for levels wages, employment rate and general unemployment, women, youth, NEETs, education levels, poverty rate. In short, it explains the weakness of our country's competitive positioning and the precariousness of its social cohesion structure that segments of economic excellence contrast without, however, reversing the trend of decline.
According to Gallo, therefore, the problem of dimensional rebalancing, of the resizing of the area and of the incidence of micro-enterprises, or of the launch of decisive concentration processes to acquire dimensional standards, of technological, organizational, professional, managerial innovation, arises. trade union relations, corporate governance able to contribute to the systemic growth of productivity, to the strengthening of productive sectors with high added value and high professional content in which Italy can be a global leader and to the strengthening of the competitive positioning of the Italian economy.
It follows – according to the work in progress, that Industrial Policy must abandon its historical hiding place and assume an important role of shared direction between the Government and the Social Partners, regarding Italy's position in the international division of labor, supply chains and sectors in which it can play a role of global leadership, or rather its overall industrial identity.
Within this strategic vision, the size of the company is a determining variable and calls into question its systemic corollaries, from exclusively family management, to generational transitions, to the high mortality rate of micro-enterprises, to the relationship between ownership and management, the bank-company and stock exchange-company relationship, the participation of workers in the innovation of work organization, the cooperative model of trade union relations, the multi-stakeholder participatory governance of the company.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/economia/produttivita-verita-e-bufale/ on Sat, 24 Sep 2022 05:41:57 +0000.