Labor productivity is the added value per working hours. In developed economies, the long-term increase in labor productivity is the main source of economic growth. In 2021, value added in the business sector increased by 6.1 percent, while the number of working hours increased by 3.1 percent. Together, this resulted in a significant increase in labor productivity (2.8 percent). The commercial sector includes all industries except government, education and real estate, including home ownership. The amount made up 80 percent of the total value added in 2021.
Positive contribution from most industries
In 2021, most industries contributed positively to the development of labor productivity. A weak negative contribution was seen in the agriculture, mineral extraction, energy, water and construction sectors as well as in the information and communication and finance sectors.
The graph below shows the contribution of each industry to the increase in labor productivity for the commercial sector as a whole. The balances in the various sectors add up to the total figure (2.8 percent).
The contribution to the increase in productivity was greatest in healthcare and industry. Both industries experienced a slightly negative displacement effect. In manufacturing because the share of total hours worked for this, on average, more productive industry fell, in healthcare because the share of hours worked for this, on average, less productive industry increased. On the other hand, both sectors had strong growth in labor productivity within their own industry. As a result, they ultimately made a significant positive contribution to the increase in labor productivity in the commercial sector as a whole.
When an industry is more productive than average and its share of total hours worked increases, there is a positive displacement effect, when the share of an average more productive industry falls, the displacement effect is negative. For a less productive industry than the average, these conditions are opposite.
The contribution to productivity growth was also positive in trade, transport and business services. The growth in these sectors was almost entirely the result of strong growth in labor productivity within the own sector. The hotel and restaurant industry, culture and business services also contributed positively to the productivity development. As the share of this, on average, less productive industry in the number of hours worked increased, there was a negative displacement effect.
Finally, there was a slight negative contribution to labor productivity in the agriculture, mineral extraction, energy, water and construction and information and communication and financial services sectors. This was primarily a result of negative organic growth in both sectors.
|Hospitality, culture, other business services, other services||0.35||-0.12|
|Information and communication, financial services||-0.06||0|
|Agriculture, mineral extraction, energy, water and construction||-0.1||0.01|
Productivity increases mainly due to higher multifactor productivity
The increase in labor productivity in 2021 was mainly determined by positive multifactor productivity. This is the part of volume growth that is not determined by the development of labor or capital. The contribution of multifactor productivity to the increase in labor productivity was 2.9 percent in 2021. Crucially, the occupancy rate, after falling in 2020, rose significantly again in 2021. The effect of this is reflected in the sharp increase in multifactor productivity.
In addition, there was also a positive contribution from the workforce composition (0.2 per cent), but there was a negative effect from the capital contribution (-0.3 per cent). Although more capital was deployed, such as machinery and computers, the development of capital deepening per working hours negative because the prevalence of labor increased faster. In addition, more qualified personnel were employed, which gave a positive contribution from the work composition.