Labour productivity decreased in 2023

Labour productivity is defined as gross value added per hour worked. Over the long term, productivity growth is the most important source of economic growth in advanced economies. In 2023, the gross value added of the market sector fell by 0.2 percent, while the number of hours worked rose by 1.2 percent. These factors combined resulted in a decline in labour productivity of 1.4 percent.

The market sector comprises all parts of the economy excluding the public sector, education and real estate activities (including owner-occupied dwellings). In 2023, the market sector accounted for 80 percent of total gross value added in the Dutch economy.

Mining and quarrying industry contributed the most to decline in productivity

In 2023, the majority of industries made a negative contribution to labour productivity. The negative contribution was largest in mining and quarrying. The contribution of a particular industry or sector to labour productivity growth in the market sector is broken down into two components: firstly the change in productivity within that specific industry, and secondly changes in that industry’s share of hours worked in the market sector as a whole (i.e. the ‘shift effect’).

In 2023, mining and quarrying and transportation and storage contributed the most to the decline In labour productivity. Gross value added per hour worked declined across these industries compared to 2022. Rental and other business services and other specialised business services all contributed positively to labour productivity. In these sectors, the amount of value added per hour worked increased in 2023.

The largest negative contribution to labour productivity growth was made by mining and quarrying. This industry saw a significant decline in labour productivity in 2023. However, on average, value added per hour worked remained higher in this industry than for the market sector as a whole. Its share in total hours worked increased in 2023, compared to a decrease in some other less productive industries. This resulted in a slightly positive shift effect.
Transportation and storage also contributed negatively to labour productivity. The negative contribution of this industry was almost entirely the result of a significant decline in labour productivity within that industry.

The two sectors that contributed the most to labour productivity growth in 2023 were rental and other business services and other specialised business services. With respect to the rental and other business services sector, this was mainly the result of improved labour productivity. In the case of other specialised business services there was also positive contribution due to the shift-share effect.

Less capital deepening and lower multi-factor productivity

Changes in labour productivity can be broken down into three different components: the contribution of multi-factor productivity, capital deepening (an increase in the amount of capital used per hour worked) and changes in the composition of labour. The change in multi-factor productivity is viewed as an indicator of technological advancements and a measure of the efficient use of inputs in the production process. Capital deepening is a measure of how much capital (such as machinery and computers) was used in the production process. Lastly, the labour composition effect indicates whether more or fewer skilled workers were employed compared to the previous year, in relative terms.

In 2023, less capital (such as machinery and computers) was used in the production process per hour worked than in 2022. As a result, capital deepening had a negative effect on labour productivity of -0.8 percent. The negative contribution of multi-factor productivity to labour productivity was -0.8 percent. Lastly, the employment of more highly qualified workers compared to 2022 (in relative terms) made a positive contribution to labour productivity of 0.2 percent.

Average labour productivity per industry 1995-2022 after revision

On 24 June 2024, newly revised statistics were published regarding the national accounts. Because the Netherlands’ economic growth accounts are based to a large degree on the national accounts statistics, this revision also affects previously published statistics on productivity.

As a result of the revision and the publication of a new estimate for the year 2022, the average year-on-year change in labour productivity between 1995-2022 rose from 1.2 percent to 1.3 percent. In the majority of industries, there was an improvement in average labour productivity compared to before the revision. The largest increase in labour productivity took place in business services, with an increase in average labour productivity from 0.4 percent to 0.9 percent year on year, between 1995 and 2022. This was mainly because value added in this sector was revised significantly upwards. At the same time, the number of hours worked was revised downwards. These two revisions combined led to significantly higher value added per hour worked than before the revision.

The largest decline in average labour productivity was seen in the energy supply sector. This was mainly the result of a significant downward revision in total value added in this industry. The number of hours worked remained approximately the same. Overall, this resulted in lower value added per hour worked in the energy supply industry.