Pandemic & Productivity at Heart of National Productivity Council's Annual Report

On Monday 13 December 2021, representatives of the National Productivity Council (Conseil national de la productivité - CNP) submitted their 2020-21 annual report to Luxembourg's Minister of the Economy, Franz Fayot.

CNP President Serge Allegrezza and the two vice-presidents, Jean-Claude Reding and Michel Wurth, emphasised the importance of work on productivity, which is at the heart of the decoupling between the production of goods and services and the use of material and human resources.

The report, drawn up within the framework of a European obligation, highlighted the low growth in labour productivity and resources in Luxembourg. However, the authors pointed out that productivity determines the standard of living of the population, thanks to the level of income that it allows to distribute, and contributes to the reduction of greenhouse gas emissions.

CNP's 2020-21 annual report, entitled “Pandémie et Productivité" (Pandemic and Productivity), reviewed the observation of the so-called Luxembourg productivity paradox (high level but sluggish progress).

The reflections of the CNP showed that the consequent aid allocated to companies by the government has enabled labour productivity (in hours worked) to be maintained. The phenomenon of teleworking, the effects of which are not yet fully understood, has enabled many industries to meet customer demand despite adversity.

In terms of boosting the productivity of the economy, the CNP proposed digitalisation, research and development (R&D) and innovation, human capital, governance and the regulatory framework as possible fields of action.

Among the main branches of the market sector, financial and insurance activities as well as the information and communication branch stood out with very high apparent labour productivity, while the situation is less satisfactory for other branches, especially manufacturing, non-financial services and trade. However, disparities do not only exist between sectors, but also within industries.

The heterogeneity of firms is an explanation put forward for the low growth in productivity. A study appended to the CNP report highlighted a growing gap between the most productive companies and those which are less productive in the non-financial services and manufacturing sectors. In addition, this study took into account the efficiency of employment allocation and the dynamics of business creation and destruction to analyse the evolution of productivity.

A second study dealt with the methodological challenges of measuring input and output and, ultimately, the productivity of banks. By combining accounting approaches and academic work, the study concluded that the productivity of financial institutes has stagnated.

Another study concerned the perception of the concept of productivity held by business leaders. It emerged from the case studies that managers associate productivity with a broader semantic field, namely that of the performance of the organisation in terms of efficiency, profitability and costs. However, to be able to act on productivity, economists and managers must agree on the same terminology. The CNP suggested reflecting on tools which would make it possible to reconcile the two approaches adopted in macro-sectoral public policy on the one hand and in business management on the other.

In order to cover the theme of sustainability, analyses on the productivity of resources and energy completed the CNP report.

The CNP's 2020-21 annual report will be sent to the Economic and Social Council (ESC) for its opinion and notified to the European Commission.

The report can be downloaded from the CNP website: https://odc.gouvernement.lu/dam-assets/domaines/cnp/CNP-rapport-2020-2021.pdf.