On Cotizalia, Kike Vázquez delights us with an article on productivity, which I liked so much that I’m going to share it here:
I don’t know if this happens to everyone, but this whole thing about productivity that people talk so much about has never really been clear to me. They say we work too little, that we’re lazy, that we need to cut our salaries by 25% to start being competitive, or “work a little more and earn a little less,” according to other sources. Wow, Spaniards really are cheeky! Good thing they warn us, because until today I’ve gone out on the street with complete confidence, without fear of being extorted by any of these dangerous characters…
So this weekend I decided to investigate this issue, trying to find out how much I should distrust going out of the house and how much I should lower my salary to qualify as an honest citizen (one doesn’t want to be pointed at for being a burden to Spain, after all). For this, I used Eurostat data, to have homogeneous, concrete figures and not rely on other people’s value judgments, which, even with good intentions, are always subjective.
With the multitude of ways to measure this so-called productivity, I wasn’t sure where to start. How about production per worker? That way we can compare who produces more—a Spanish worker, a Portuguese worker, or a German worker, for example. Below are the European Union data and some other countries for comparison, using the terms Eurostat uses (PPS).
If you click on the image and look at it closely, you’ll see that in 2009, the latest available data, the production of a Spanish worker had nothing to envy from a Swede, Dutch, or Italian worker—and even surpasses Germany, the United Kingdom, Denmark, or Japan! It seems that, on average, we’re not as clumsy as we’re sometimes told. The statistics indicate that when a Spaniard works, they produce more than a random worker in the Eurozone. Each worker in our country has a higher output than the average, whether considering the EU-27 or EU-15.
This might seem surprising, but it happens for a very simple reason: Spaniards work a lot of hours. What this graph tells us is that each worker produces more, for example, than a German, but it doesn’t show the time spent or the cost involved. Still, one thing is clear: in Spain, people do work, and they are far from lazy—at least on average.
However, despite the usefulness of this information, the data are somewhat “biased” for those wanting to know real productivity. They talk about output but not efficiency, meaning production rather than productivity, and they don’t account for whether workers are full-time or part-time. To get a clearer picture, let’s take it a step further and chart production per hour worked, a concept that better approximates what we’re actually looking for.
Again, if you click on the chart, you’ll see that, while we cannot compare ourselves to productivity leaders like the United States, Belgium, or the Netherlands, where people work both long hours and efficiently, we are far ahead of others like Greece or Portugal, almost doubling them in this indicator. Comparisons may be uncomfortable, but for all those who place us in the PIGS group and, along with Portugal, recommend that we “improve productivity,” I would suggest taking a closer look at the chart. Interestingly, we are ahead of countries like Italy, the United Kingdom, or Finland, and close to Denmark, Sweden, and even the Eurozone average. I’m starting to feel less guilty about not working for free…
It’s clear that we are not far from the Eurozone average (although, according to McKinsey–Fedea, closing this gap could create a million jobs, which is no small thing). On the other hand, we earn much less. According to the same report, hiring a university graduate aged 25–34 in Spain costs €34,000, compared to €66,000 in Germany or €70,000 in the United Kingdom. Comparing this with Eurostat data, we see that British workers are, on average, less productive than us—but earn twice as much! And yet “markets” and bureaucrats recommend that we improve productivity? Incredible!
It’s true that Eurostat figures are adjusted for PPS, meaning purchasing power, so the comparison with salaries is not entirely direct. Even so, it suggests that we may not be as unproductive as we are repeatedly told—“Goebbels-style”, though obviously we should still improve if we want to truly belong to Europe.
Looking at the data again, if a Spanish worker produces more than the Eurozone average and does so in only slightly more time, what’s going on here? Why is everyone pointing fingers at us? What argument is being used? Enter unit labor cost, which is the cost relative to what is produced. Anyone trying to argue that Spain is highly unproductive today will refer to the following chart.
I have tried to include the most representative countries so that we can get an idea. As it’s a little confusing what you see with so many lines, I will try to explain it. If the line goes up, it means the costs to perform the same production are rising in the country, and if it goes down, the reverse is true, therefore it directly impacts competitiveness.
Taking the year 2000 as a base, we can see that at the end of the decade, the countries where salaries have risen the most are Greece, Denmark, the United Kingdom, Italy, Spain, Ireland, Portugal, Belgium, Finland, France, Sweden, and Germany, in that order.
When someone represents this graph, it is a sine qua non condition (or indispensable condition/prerequisite) to overlook that the starting salaries are not equal. That is to say, if a Spaniard earns 100 in the year 2000 and a German earns 150, by the end of the decade the Spaniard will have 130 and the German will have 159. Now then, it must be emphasized several times that we are losing competitiveness, and to make matters worse, eliminate most of the countries from the graph, preferably leaving only Germany, Portugal, Ireland, and Greece. After allowing an audience without further data to compare to reflect for a few minutes, one will say, “It is imperative to increase competitiveness so as not to be rescued,” and everyone will go home remorseful and crestfallen. Mission accomplished.
The reality is that, as we have seen, our productivity is not as distant from that of the Eurozone; since our native salaries are clearly lower than those abroad, it is logical that they tend to equalize. That’s all it is! But also, with that graph, it might give the impression that the average Spaniard has been profiting like never before, which is far from the truth, if we make the same graph eliminating the inflationary effect:
In reality, Spanish citizens have kept their wages down even more than the “heroic Germans,” meaning that during this period of “partying and drunkenness,” they have lost purchasing power. Thus, we can see that in 2010 the average worker saw their real wage decrease by almost six points compared to 2000, a figure that contrasts with practically all of Europe, where remuneration has been higher.
Conclusion? Well, it goes from seeming like it’s a miracle if we aren’t rescued, to seeing that there are a lot of self-serving lies. Obviously, not everything is perfect; we have 20% unemployment, so if these people join the labor market, the average productivity will decrease. To avoid this as much as possible, it is true that those who are unemployed and want to look for work will have to lower their expectations. Furthermore, I’m not revealing anything new by saying that our labor market is more rigid than desirable, which means that those who perform best are not necessarily paid more (or that’s what any modifications should aim to achieve).
On the other hand, we are an indebted country with insufficient industry; if we want to change that situation and export, we must offer something to companies, and therefore our dream of earning like other Europeans will not be possible for a long time. We are in a bad period and an effort must be made, from those at the top to those at the bottom, but there is a long way to go between that and placing the blame on workers, as is tacitly being done. We can be proud of many things, and I hope this article has helped to make us a little prouder.
(Vïa: Cotizalia)