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CASE STUDY 9.2: PRODUCTIVITY IN EUROPEAN AND INTERNATIONAL LABOUR MARKETS

1. What explanations have been put forward to explain the European Union's poor productivity performance?

The answer to this question should initially consider what is meant by productivity in terms of the debate between output per employee and output per hour worked and the difficulty in measuring productivity in the manufacturing and service sectors. The case study suggests that lack of ICT investment and its "subdued" impact in Europe can be put forward as explanations, as can the inability of some of the EU's labour markets to adapt to rapid change in the way things are done. Other factors include:

  • Selective skills shortages;
  • IT consumption
  • Particular sectoral imbalances with the US

 

2. What policies can be used to improve the European Union's level of productivity?

There have been many suggestions as to the ways in which EU productivity can be imrpoved;

  • Increased labour market flexibility;
  • Improved level of state and company investment;
  • Improved introduction of ICT into EU organisations;
  • Increased levels of R&D;
  • Lower tax rates on individuals and organisations;
  • Increased use of enterprise and competition policy within the EU;
  • Reduced levels of state aid;
  • Opening up markets to competition, and;
  • Improved level of education and training.

 

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