Professor: Business think-tank’s report on productivity is too downbeat

According to professor Matti Pohjola, Finns are hard-working people

Matti Pohjola

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Matti Pohjola, Professor of Economics at the Aalto University, regards as too gloomy a report made by the Finnish Business and Policy Forum (EVA) on the impact of the fall in labour productivity.
      ”In general, estimates on labour productivity are made taking into account the different stages of the economic cycles in order to eliminate the downswings and upswings. For this reason, it is not possible to make any far-reaching conclusions on the development of labour productivity in the past few years”, Pohjola argues.
     
In the EVA report, the analysis of the trends in labour productivity has focused on the period between the upswing and the subsequent slump.
      ”The concerns with the slowdown of labour productivity growth suggested by the report are completely real, but the situation is not quite as bad as the report insinuates”, Pohjola continues.
     
According to Statistics Finland, the country’s gross national product (GNP) plummeted in 2009 by 8.2 per cent compared with the previous year.
      The slowdown of labour productivity growth was caused particularly by the fact that the demand for products made by Finnish export companies declined significantly.
     
”The companies saw that the fall was due to a decline in the overall demand caused by the economic situation. That is why they did not cut down on the number of jobs by some 8 per cent as well, but held on tight to their employees, which demonstrably led to a decline in labour productivity”, Pohjola explains.
      According to the EVA report, Finnish companies have a surplus of 150,000 employees, if they wish to keep the labour productivity growth rate as strong as it was prior to the recession.
      ”If Finland were never to recover from the recession, the dismissals of 150,000 employees could come true. In my opinion, the estimate is too downbeat”, Pohjola notes.
     
According to Pohjola, there are three factors that can affect the labour productivity rate: training of the workforce, investments in plant and machinery, and progress in technology.
      ”Of these three factors, the progress in technology is the most important one. A large part of productivity growth comes from new products and the fact that old products are manufactured more efficiently”, Pohjola states.
     
From the mid-1990s to the recession that began in 2008-2009, Finland’s economic growth was stronger than that in the old EU member-states on average.
      Particularly the success of the mobile phone manufacturer Nokia had a favourable effect on Finland’s economic growth.
     
In the past few years, Nokia’s significance has diminished. Despite this fact, Finland’s gross production is predicted to grow by almost 4 per cent in the current year.
      Pohjola denies the frequent allegation that Finns do not work hard enough, saying that it is simply a false accusation.
     
”By European standards, Finns do a lot of work, as the labour force participation rate in this country is high, the annual number of working hours is high, and the proportion of part-time jobs is relatively low. Our standard of living is lower than that in the United States, as our labour productivity is roughly 20 per cent weaker. The most significant factor is the weak productivity in the service industry”, Professor Pohjola points out.
     
     
FACTFILE: Productivity is a measure of efficiency
     
Labour productivity is one of the most significant measures of the efficiency of the national economy.
      Labour productivity is the ratio of output to the input of labour, for example hours worked.
      In terms of the national economy, the measure of productivity is the country’s GNP divided by hours worked.
      In workplaces, labour productivity can be calculated by dividing the net sales by hours worked.


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