Capital, Labor and Progress: Why Is Productivity Declining?

When comparing the US and Europe, we see a stagnation of labor productivity in Europe since 2017 and an increase in productivity of almost 2% per year in the US. When we compare France and the other European countries, we see that, while labour productivity has stagnated in Europe since 2017, it has fallen by 4% since 2019 in France. Stagnation or decline in productivity has very negative consequences: loss of attractiveness for investments, lack of surplus to share between companies and employees, low tax revenues and budgetary difficulties. Why is productivity declining in France and stagnating in the rest of Europe? Institutional explanations can be put forward (the increase in the number of apprentices in France), but the main causes are economic. On the one hand, underinvestment, particularly in new technologies, which also leads to a decline in labour productivity; this underinvestment can be attributed to the high level of risk aversion among European companies, which also explains the weakness of their Research and Development spending, and the weakness of funds raised in venture capital (22 billion euros in 2024, less than 2 billion euros in France against 250 billion dollars in the United States). On the other hand, a decline in motivation at work, which is also seen in the rise in the rate of absenteeism, may be linked to management techniques that are too authoritarian, too vertical, and to insufficient explanation of company strategies. Finally, the low level of qualification in the labour force continues to decline in France and Europe, as shown by the results of the latest PIAAC survey conducted by the OECD.