Labor Productivity: Spain vs. EMU

Summary

The labor productivity gap between Spain and the eurozone has expanded over the past decade, despite higher gains in value added per hour and per worker in Spain since 2022.

Key points

• Key points:
• All non-agricultural sectors in Spain show lower productivity levels than those in the EMU. Additionally, more productive activities in Spain have a minor share of hours worked, while the participation of the less productive ones is higher than their European counterparts.
• Labor productivity behavior during COVID-19 and the subsequent recovery mirrored that of the financial crisis, but the composition differed. The increase in productive efficiency accounted for 20% of the productivity rise in the first half of 2020, while the unprecedented magnitude of compositional effects explained the remaining 80%. Since the fourth quarter of 2022, the improvement in domestic productivity has offset the negative impact of compositional changes.
• In the EMU, a less pronounced compositional effect explained the smaller growth in labor productivity in the first half of 2020 compared to Spain, while the decline in productive efficiency, especially in industry, has led to a more unfavorable performance since the onset of the war in Ukraine.

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