I\’m missing something here

For Greece has not – as is often claimed or implied – lagged behind Germany in raising productivity: on the contrary hourly labour productivity increased more than twice as fast in Greece than Germany during the ten years of the euro since 1999. Nor do frequent claims in the media of Greek ‘laziness’ stand up to scrutiny: average annual working hours are the longest in Europe (and hundreds of hours per year longer than in Germany!). The problem has been with nominal wage and price setting.

Due to strong differences in wage setting, Greek nominal unit labour costs increased by more than 30% since the start of EMU – and the increases in Italy, Spain, Portugal and Ireland were even higher – whereas in Germany they rose by just 8%.

Can someone help me out with what I\’m missing?

How can Greek labour productivity have increased twice as fast as that in Germany if nominal (and they do use the same currency) unit labour costs have gone up in Greece some three times the rise in Germany?

Aren\’t these really the same thing? Attempts to measure relative labour productivity and the changes in it? So how can one be pointing one way and the other another?

12 thoughts on “I\’m missing something here”

  1. “labour productivity increased more than twice as fast in Greece than Germany” but from what base? because if they produce more per hour and work longer hours, then they ought to be richer.

  2. As above but with added “Murphy is an idiot” – I suspect that Murphy is calculating “labour productivity” as “what is produced per person per hour”, neglecting to include cost of production in the calculation. That would of course be a crazy way to calculate it but unless you discount cost I cannot see any way he could come up with that combo of figures.

  3. @Falco: “I suspect that Murphy is calculating “labour productivity” as “what is produced per person per hour”, neglecting to include cost of production in the calculation”

    Well knock me sideways; that is the definition of ‘labour productivity’, after all. If you want to include input _costs_, try using a different term. Look here:
    http://en.wikipedia.org/wiki/Workforce_productivity

  4. What Luis said:

    I’m guessing the Germans are pretty near the top of what is currently possible vis a vis what a human can actually do in an hour whereas the Greeks are probably near the bottom. This means it is much harder for Fritz to improve his productivity by 1% than it is for Zorba.

  5. “How can Greek labour productivity have increased twice as fast as that in Germany if nominal (and they do use the same currency) unit labour costs have gone up in Greece some three times the rise in Germany?”

    As a non-economist I will say: Profligacy. Greece cares less about value for money than Germany.

    Easy money, loose credit, spendthrift Government, increased debts.

    If labour productivity and unit labour costs increase at the same rate you are not getting anywhere. If labour productivity increases and unit labour costs decrease you are getting more efficient. If labour productivity decreases and unit labour costs increase you are getting less efficient.

    Relatively speaking Greece has done the latter – the increase in unit labour cost has been higher than the increase in labour productivity.

    Does that sound about right?

  6. All very peculiar.What is beyond dispute is that the Greeks work 2120 hours a year while the Germans work 1432 (OECD).So getting people to work all the hours God gives for pitiful wages makes a country relatively poorer.The real multiplier comes from how much equipment the worker can call on and the synergy of working in an organised system,lone workers getting nowhere.Not the orthodox right-wing /individualist position though.

  7. DBC Reed,

    My next-door neighbours are middle-aged and semi-retired, yet drive a Mercedes and never seem short of cash.

    My neighbour’s on the other side are young and work long hours, yet drive a crappy second hand car. Should I tell my young neighbour to go part-time and thus increase his income?

  8. For once, I’m not with Tim. It is not unreasonable to measure labour productivity in physical terms: value of output per man-hour. I don’t see why that’s crazy: it is a standard, useful statistic.

    For example, it seems sensible and useful to know about, and understand, differences between output per man hour in the USA and Ethiopia, before taking the different costs into account. The former is the normal measure of labour productivity.

    Sure, if deciding where to site a factory you’ll care about output value compared to cost of inputs. But that doesn’t mean you jump straight to that measure. By analogy, it would be equally odd to say that because profits are ultimately what matters, businesses should not be interested in revenue, only revenue – cost.

  9. Greece will have started from a very low point and as mentioned above Germany has been about as efficient as it can get for a long time.

    What the figures show that although Greeks are working longer, producing more, getting paid more they are all in line so are not actually becoming more efficient.

    I would also wonder about the hours worked. Greece is a heavy in tourism and has a large tourist centric economy. Tourism is a long hours industry.

    Was the average retirement age in Greece not 53 years old ? I am guessing that tells you a lot.

  10. Productivity rises by 3% in Greece, and 1% in Germany. Wages rise by 4% in Greece, and 0% in Germany. Unit labour costs rise by 1% in Greece, and fall 1% in Germany.

    That was hard.

  11. @Mr Potarto
    Don’t see why I should be bothered by how your neighbours make ends meet.You obviously don’t know what they do for a living. The younger generation obviously can’t afford an efficient car,probably because they are being rack-rented by the mortgage or the veritable rent. Since young workers have to work off a State-imposed debt (that’s the real State not the government) of 100k quid plus for the land underneath their address,its likely they’re struggling.Also they can’t, for the same reason, afford to buy the products of their fellow workers’ labour and have to rely on cheap imports .So the status quo is no place to start. (The middle-aged couple probably made some money from House Price Inflation: possibly from inheriting their parents
    inflated property values.)
    There is no point the young people working harder because house prices will go up lock step with increasing prosperity.The clue is in the title of Henry George’s hit polemic ” Progress and Poverty”.
    Perhaps if the Greeks had had the undodgeable tax on land values (promoted by George and many others), their public finances would not have been in such a mess.And Greeks would not be scuttling to London to buy two million quid houses.
    Now off to vote in an election where none of the main parties has a clue.Change?Fairness?The last things the Homeowning majority of people in the Uk wants.Just keep the State-sponsored flow of asset price/house price subsidies coming that’s their ticket.
    The weather looks a bit grim too.

  12. Tractor stats.

    Or, as they used to say in the Gulag, “tukhta”.

    All socialists do it.

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