Arnold Kling  

France, UK productivity puzzle

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Theodore Dalrymple writes,

A French employee works 30% fewer hours than a British worker, and a much smaller percentage of the French population than the British works at all, yet total French output is very nearly equal in value to British.

I checked the CIA world factbook, and in terms of total population and total GDP, France and the UK are about equal. So what explains the lower labor input of France? Some possibilities:

1. Higher capital/labor ratio. If it's more troublesome to hire labor, you substitute capital. But it seems to me that it would take tons and tons of capital to make up for the difference in labor input.

2. Higher labor quality. Remember, the UK includes Ireland and Scotland, and the unemployed French workers probably are not their most high-output individuals.

3. Measurement problems. For example, is farm output in France over-estimated because of their agricultural policy? Also, a huge percent of their labor force and GDP is in government. Is the value of their output measured accurately?

I lean toward (3) as the explanation. Comments welcome.

UPDATE: I decided to look up some data. The share of public sector employment in total employment is about 20 percent in the UK and about 22 percent in France. The share of public sector GDP in total GDP is about 43 percent in the UK and about 54 percent in France. So, if both countries had $100 in GDP and the UK used 100 workers and France used 75 workers, we would have
--UK public sector 20 workers, $43 in GDP; private sector 80 workers, $57 in GDP
--France public sector 16.5 workers, $54 in GDP; private sector 58.5 workers, $46 in GDP.

In that case, private sector GDP per worker = .71 in UK, .78 in France. So the difference is not nearly as large in private sector GDP. What I am saying here is that most of the French "productivity miracle" is in the public sector, where the measure of output might be considered suspect.

Comments and Sharing

COMMENTS (25 to date)
patrick writes:

It seems like you could compare productivity within relatively privitized/liberalized sectors to weed out the major differences in government interference.

cure writes:

Ah, Arnold, you were up here with the Boston Irish when you went to MIT, right? They think it's bad enough that there's a United Kingdom of Great Britain and Northern Ireland, but to say the UK includes all of Ireland would be heresy. And indeed, Ireland has a higher GDP per capita these days than the UK.

As for the France puzzle, part of the explanation is that the lost hours and workers are marginally inefficient hours/workers. If you gave everyone 10% of time off in the US, you wouldn't expect a 10% drop in output. That doesn't explain the magnitude of the difference between UK and France, but it certainly factors in.

jaimito writes:

Like Italy, France has huge non-formal employment. When hiring someone legally starts to seem like a Catholic marriage, people prefers all kind of informal unregistered economic relations.

Fazal Majid writes:

Employers pay an extra 60% in social security type taxes on top of an employee's salary. Private sector employees are among the most productive in the world, as the companies would simply go bust otherwise. The French vocational training system is also pretty good, if not as excellent as the German one, and that improves the quality of output.

Adam writes:

The French just work harder, and deserve their extra time off.

Dr Zen writes:

Number 3, you have to suspect. I'd be looking to see whether the UK has more casualised employment (bringing down jobless rates by counting underemployed as employed) too.

Also, in my experience long hours do not equal more productivity but do equal more fucking around. Perhaps the French get by with fewer meetings. Also, as another commenter has noted, cheating is a French institution, so the French are probably a fair bit more employed than they appear to be.

Bill Stepp writes:

(3) is probably correct. Also, why assume the CIA stats are correct? This is the gang that said in the late 50s and early 60s that the USSR was growing as much as 9% annually.

Rob writes:

Isn't it just the fact that the least productive people in France are not employed. The young, the immigrants and the old. In the UK, these people are much more likely to be working because of the strict social security laws and the more flexible markets (greater scope to work part time). These people do not contribute a great deal, but there is a beleif that it is better to work than not. In France, these occupations are more liekely to be done by machines (capital) and there is a beief that some jobs are inhumane or should not be allowed.

Ronnie Horesh writes:

France is less embarrassed and more cold-blooded about manipulating the European Union's trade rules to suit France. Everybody in the EU pays higher food prices, but the French are the big beneficiary. The French are arch-manipulators and quick to resort to blackmail, threatening mayhem if they don't get their way. Sounds far-fetched? Look at the Quebecois and what they are doing to the rest of Canada.

spencer writes:

When I was a young man we use to think that growing productivity would give everyone more free time and that this was a great developemnt.

It never happened in the US, but it did in Europe.

But in recent years the right wing has decided that individual having more leisure was a bad thing.

Why is more leisure a bad thing?

Robert Cote writes:

The CIA Worldfactbook is written in English. THe UK speaks a quaint form of English. Much of the world market transacts in English. The Francophones are not at the party.

Now there's at least a Nobel Peace Prize if you can also explain why English speaking countries have higher homicide rates. I personally suspect there's a Peace Prize in Economics if you can explain it. In the meantime don't underestimate language barriers as obstacles towards productivity.

Randy writes:

The right thinks leisure is a bad thing? That's news to me. But to answer your question, more leisure is bad if it is taken at someone else's expense - if it is unearned.

Bud1 writes:

I think they're testing the broken window economic theory and it's impact on GDP in Paris right now.

Bob Knaus writes:

What a carnival of pre-concieved notions masquerading as explanations! I'd suggest a little more fact-checking and arithmetic:

From CIA Factbook (which unfortunately my ISP can't get me to at the moment) French farm employment is about double the percentage of agricultural GDP but the numbers of both are small. The most natural conclusion would be that agriculture is a minor drag on per-person GDP in France.

From the US Bureau of Labor Statistics (go to page 8), real GDP per capita is $28K France & $30K UK, while real GDP per employed person is $71K France & $63K UK. The most natural conclusion from this is that the French who are employed are more productive that their UK counterparts, but that they have to support more French who don't work than the Brits do. (US numbers are $38K & $80K respectively)

From the US Dept. Of Labor, annual hours worked per employed person is trending down in all industrialized countries. Numbers for 2001 are US 1821, UK 1711, France 1532.

If we assume a 52-week year then the workweek in hours is US 35.0, UK 32.9, France 29.5. But, if we assume vacations of 2 weeks US, 4 weeks UK, and 6 weeks France (based on anecdote, not statistics) then we get workweeks of US 36.4, UK 35.6, France 33.3. The conclusion from this is that average workweeks are already pretty short, and don't differ a whole lot between the UK & France, so one should probably look elsewhere for productivity differences.

If you're looking for a hypothesis to test which ties in with current events (those are the fun ones, right?) try this: In each country's social contract, there is a trade-off between workforce particpation and workforce productivity. In France, social institutions have constructed incentives and barriers which favor productivity over participation. Those kept on the outside are unhappy with this arrangement.

Or to put it more bluntly, a saying from our own era of civil-rights struggle: "Atlanta, the city too busy to hate."

Rupert Willis writes:

I'm not sure I would have gone to the CIA fact book as first choice for data on the EU economy. Eurostat is a better bet. Or try this - the EU competitiveness report for 2003 - page 37 has the relevant data on GDP per hour worked.

French GDP per hour worked is roughly 30% higher than in the UK.

I'm not sure why so many are leaning towards explanation (3). I don't really see why French GDP figures should be hugely distorted. France follows EU norms on National Accounts as far as I am aware. I'm not aware that Eurostat has big problems with the way the French figures are drawn up.

And I don't see how agriculture could explain this away. Even in France agricultural output is a small percentage of GDP. Far too small for measurement errors to lead to an error of that size.

I don't have data to hand (though they are surely around somewhere) - but I would lean towards other explanations - that is - the France employs far fewer marginal workers, and uses more capital per worker employed.

Bob Knaus writes:

Rupert - that link is a good one, thanks for advancing the cause of fact-based commenting!

Here's a Wall Street Journal article advocating the theory that, in France, both high productivity and recent riots have the same root causes in a rigid labor market. You'll need a subscription to read it unfortunately. Money quote:

France prides itself on its hourly productivity, among the world's highest. But Philippe Manière, director of the think tank Institut Montaigne, says the high productivity rate is achieved only by shutting out of the job market the immigrants who might cause it to fall. "In France, you employ the most productive people and you leave the rest in the street," he says.

The article is written by staff reporters but does contain a strong point of view.

spencer writes:

In todays Financial Times Martin Wolf has a very good discussion of the difference between UK and European productivity. He seems to think it is largely explained by inter-sectoral differences. But these sectoral differences are largely between services and manufacturing, not ag. One of the biggest is in retail and distribution, where so much of the recent gains in US productivity have occurred.

spencer writes:

Question -- if labor rigidity is a causal factor in French rioting, why did the US have essentially the same race riots when the US has the most flexible labor mobility system?

Jon writes:

Ah, if they are employed in government as teachers or police people or highway builders they are less efficient; if they are employed by a private company to make bombs that the government drops on another country they are efficient?

Gabriel Gonzalez writes:

If a pizza parlor is only allowed to remain open 1 hour per day, it will sell more pizzas per hour than if it were allowed to remain open 10 hours.

If the pizza parlor has to pay higher wages, there will be fewer pizza parlors, fewer pizzas sold, but higher pizza productivity per hour.

France legislates away low marginal productivity jobs and working hours (below "optimal" marginal productivity) increasing the average hourly productivity.

Also, how is public sector productivity measured?

Daniel writes:

>>Also, how is public sector productivity measured?

As far, as I remember, it is measured by employees incomes. That is, if teachers and policemen are well paid, then they have a high per-hour-productivity.

aaron writes:

The implication is that much of Frances high income comes from convincing highly productive people to spend their money in France.

Marcus writes:

"Now there's at least a Nobel Peace Prize if you can also explain why English speaking countries have higher homicide rates"

France has more murders per capita than either the Canada, Australia, New Zealand or the United Kingdom. "English speaking countries includes" America, which has a lot of blacks. Compare the largely white northern states near the border with Canada with the largely white Canada and you get about the same rate of murders.

Bob Knaus writes:
spencer writes:

Question -- if labor rigidity is a causal factor in French rioting, why did the US have essentially the same race riots when the US has the most flexible labor mobility system?

I wuz justa kid... but even post-riots it was clear to anyone in the South, and in urban areas elsewhere, that barriers to getting ahead were a big part of what fueled the riots. You can take Jim Crow laws off the books but a thousand unwritten laws remain that will keep a black man from getting a job because of his race.

I know about unwritten laws. I grew up with them. They entangle themselves in your worldview in ways that are hard to see. Even with a conscious effort to rid myself of them, from my early teens on, I still find myself jumping to conclusions because of a person's skin color. These things take time to change.

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