How has labour productivity changed over the past 50 years?
Labour productivity across the economy as a whole has more than doubled over the past 50 years. Most of this increase was achieved between 1974 and 2013, when labour productivity increased every year at an average rate of 1.5 percent. Over the past decade, however, gains in labour productivity have slowed to an average annual rate of 0.2 percent.
In 2024, labour productivity declined by 0.2 percent. In 2023, the fall was bigger, at 1.9 percent. That was the second-largest drop in labour productivity in 50 years. The only year that saw a larger drop was 2009, during the financial crisis, when there was a fall of 2.2 percent.
Shift towards a more services-based economy
The labour productivity of the economy as a wholenoot1 is an indicator of economic value added per hour worked. Productivity may improve as a result of a better trained or more experienced workforce, new machinery or automation, or other forms of innovation. In the services sector, however, labour productivity growth tends to be slower because innovation in this sector is more difficult to achieve. The services sector has grown as a share of the Dutch economy over the past 50 years.
Phase-out of gas production in Groningen
Across almost all industries and sectors, labour productivity growth has been lower over the past decade than it was between 1974 and 2013. In the mining and quarrying industry, there was even a fall in productivity. This was due to the phase-out of natural gas extraction in the northern province of Groningen. In the decade since 2014, labour productivity in this sector declined at an average annual rate of nearly 16 percent, compared with an average gain of 0.7 percent in the period prior to 2014.
More CBS research into productivity
Labour productivity is an important theme because improvements in labour productivity are the most important source of economic growth in advanced economies over the longer term. For this reason, Statistics Netherlands plans to carry out extra research to understand changes in productivity in different sectors and types of companies.
Relevant links
News release – Diminishing gains in labour productivity over the past 50 years
News release – Labour productivity in the Netherlands down again in 2024
Publication – Internationalisation Monitor, fourth quarter of 2022, Productivity
Noten
Labour productivity across the economy as a whole
Labour productivity is a measure of the efficiency of work done. For the economy as a whole, it is calculated as gross domestic product (in market prices) divided by labour volume. For the labour productivity of particular sectors, the gross value added in basic prices of the relevant sector is used instead of gross domestic product. The best measure of the volume of labour is the number of hours worked. If this is not available, the number of years worked or (least accurate) the number of persons employed can be used instead.
Labour productivity is an important economic indicator: rising labour productivity makes companies more competitive and leads to greater prosperity. It can be improved by increasing the use of machinery, or by using it better, for instance. Certain professions, such as hairdresser or violinists, are intrinsically dependent on one person’s labour. That means there are few potential gains to be made in terms of labour productivity. This accounts for a large degree of the differences in labour productivity between economic sectors.
Labour productivity can be calculated both for the commercial sector and the economy as a whole. The commercial sector includes all economic sectors except for government, education, households and the real estate activities sector. Productivity trends in these sectors are more difficult to measure and to interpret. Statistics Netherlands also publishes annual labour productivity figures for the commercial sector.