”…………..Productivity has become a unifying theme for the Organisation for Economic Co-operation and Development (OECD) work in recent years. Productivity determines wage growth and living standards, and as populations in many developed countries have found, the only real source of growth is productivity growth. Today, I would like to look at recent trends in productivity, the causes of declining productivity, and some ideas on how to revive productivity growth.
First of all, when the per capita gross domestic product (GDP) of the top 17 OECD countries is compared, Japan has per capita income of about 25%. This is in the bottom half of the OECD, and there is a big range going down to Mexico and Turkey. The most important reason for the differences in per capita income is labor productivity. There are differences in labor inputs where countries such as Korea and a few others work long hours, but most of the variation is found in productivity per hour of work. Japan, surprisingly, has a very large gap of more than 30% relative to the top half of OECD countries. This is despite an excellent education system, high research and development (R&D) spending, state-of-the-art technology, and hard workers. It seems to me that this gap should not exist, and that Japan could narrow it over time with effective policies………….”
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Source: RIETI Research Institute of Economy, Trade and Industry