Euro zone labour productivity growth has been slowing partly due to a failure to use new technologies for boosting output per worker, the European Central Bank (ECB) said today.
To counteract the slowdown, the ECB urged governments to stimulate competition and reform labour markets and education systems to raise the supply of qualified employees.
"Reducing existing barriers to market entry, in particular in services industries, could provide incentives to speed up innovation and productivity growth," the ECB said in a chapter of its July monthly bulletin on labour productivity trends.
The ECB cited data showing a continuing decline in euro area productivity growth in the 1990s, which contrasted sharply with the improved productivity performance in the United States.
Total labour productivity growth per person employed in the euro zone slowed to 1.3 per cent a year in the 1990s from 1.9 per cent in the 1980s. The slowdown was even more marked - easing to 0.9 per cent - in the 1996-2003 period, ECB data showed.
Different industrial sectors saw widely different outcomes, with productivity growth deteriorating to negative rates in the construction, finance and business services sectors, while holding broadly stable in manufacturing, trade and transport.
Part of the decline in productivity growth over recent years is due to a stronger increase in employment, as it appears that those in work are not making as much use of new information and communications technologies (ICT) as their US counterparts.
"The ICT-using services sectors, which have contributed significantly to aggregate productivity growth in the United States, are still relatively small in the euro area," the ECB said.
"Only if the euro area can manage to reap the benefits of innovation and the widespread diffusion of new technologies will it be able to improve its long-term prospects for productivity growth," the ECB said.