e likely, on average, to have a relatively low level of productivity, at least at first.
However, there are three reasons why this is not a cause for concern. First, the temporary negative effect on productivity growth is estimated to be rather small. Secondly, even if growth in productivity - GDP per employed person - is negatively affected, a higher employment rate unambiguously raises growth in GDP per capita in the short term. Newly employed people clearly contribute more to GDP than they used to, even if their productivity is below average. Thirdly, there are few reasons to think that a higher employment rate has any negative implications for longer-term productivity growth, which is what really matters for the competitiveness and dynamism of the EU economy. These points-important ones for the Lisbon strategy - are supported by two separate pieces of analysis: an econometric analysis of the dynamic response of productivity to structural employment shocks, and a simulation based on the Commission's macroeconomic model. Thus, there is no genuine trade-off - in the sense of prioritising one of the two - between policies to raise the employment rate and policies to foster productivity growth.
В
2. More and better jobs - an example of goal inconsistency?
2.1 Background considerations
At the moment, EU GDP per capita in purchasing power parities is around 70% of the US level, with 1/3 of the gap due to productivity differentials and 2/3 due to a lower labour input (ie a lower employment rate and hours worked compared with the US). Consequently, improving the EU's productivity performance and raising employment is fundamental to increasing the long-term growth potential of the EU economy. However, several observers have argued that the twin goals of raising both employment rates and productivity growth may be difficult, or even impossible to pursue simultaneously, given a perceived negative trade-off between employment and productivity.
The basic argument for the existence of a negative relationship between employment and productivity is derived from straightforward comparative-static reasoning. For any standard production function, average factor productivity will decrease with rising output as the expansion of production will require the bringing in of less and less productive factors into operation - less fertile soil, older and less efficient equipment and machinery, workers with lower abilities and skills, etc. Then, obviously, higher employment will inevitably be associated with lower output per worker and vice versa. Thus, in such a comparative-static setting it is easy to construe a situation where, for example, regulations and restrictions excluding low productivity workers from employment result in a higher level of actual labour productivity, but it will come at the price of lower employment; similarly, reform efforts to price back low productivity wo...
