July 24, 2024

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Labor productivity growth in the Netherlands is significantly lower than in the United States

Labor productivity growth in the Netherlands is significantly lower than in the United States

Published: June 20, 2024

Between 2000 and 2022, labor productivity in the Dutch market sector increased less than in the United States. This is a challenge for the Netherlands, which aims for prosperity and national competitiveness.

Labor productivity is an important basis for the growth of national income and prosperity, especially among the aging workforce. Productivity growth also plays an important role in a country’s competitiveness: if a competitor can produce more with the same amount of labor or capital, productivity growth is high on policymakers’ agendas. Much attention is paid to international competitiveness in the Netherlands and Europe.

Labor productivity is usually measured as the average value added per hour. It is common to zoom in on the market sector of the economy, excluding public services, the real estate sector, and mineral extraction. For these sectors, it is difficult to express productivity in terms of added value or price fluctuations, for example housing or energy, can obscure the picture. Between 2000 and 2022, productivity growth in the U.S. market sector was 53 percent, compared to 26 percent in the Netherlands. The difference was mainly made in the period 2000-2011 (Figure).

Economists have been looking for reasons for low productivity growth in the Netherlands for some time. Hugo Ergen previously stressed at ESB that more employees in the Netherlands are starting to work in less productive sectors. Additionally, according to the Central Statistics Office, productivity growth in sectors in the Netherlands has fallen faster than in the US, for example due to lagging innovation and underdeveloped economies. Therefore, there is a challenge to make the Netherlands more productive, for example by promoting innovation and organizing the labor market so that employees work in a more productive environment.

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