See also at oe.cd/hsop
The Human Side of Productivity The role of skills and diversity for firm productivity Peter Gal Senior Economist for the OECD Global Forum on Productivity Joint with Chiara Criscuolo, Timo Leidecker and Giuseppe Nicoletti and supported by participating national institutions 2021 Annual Conference of the GFP/G20 | 8 July 2021 | Venice, Italy
Acknowledgements Belgium
Central Bank
Costa Rica Central Bank
Emmanuel Dhyne, Gert Bijnens Alonso Alfaro Urena, Catalina Sandoval Alvarado, Evelyn Munoz
Denmark
Ministry of Industry, Business and Financial Affairs
France
CASD
Germany
IAB Nuremberg / HU Berlin
Alfred Garloff
Hungary
Ministry of Finance
Peter Toth, Istvan Szabo, Andras Svraka, Katalin Horvath, Balint Van, Tibor Keresztely
Italy
ISTAT INAPP and University of Milan
Caterina Viviano, Patrizia Cella, Maria Carla Congia, Fabio Bacchini; Giorgio Barba Navaretti, Anna Rosso,Camilla Andretta
Japan
Institute of Economic Research, Hitotsubashi University
Ryo Kambayashi
Portugal
Ministry of Economy, Statistics Portugal Ricardo Alves
Sweden
Growth analysis
OECD colleagues
Søren Gaard, Katrine Bagge Thorball, Magnus Skafte-Larsen, Louis Konstantyner
Pontus Mattsson Patrick Lenain, Alexander Hijzen, Mariagrazia Squicciarini, Lea Samek, Glenda Quintini, Oliver Denk, Wouter Zwysen
Motivation: why the productivity differences across firms? • Widespread & persistent differences across firms
Productivity gaps across firms within the same country and industry
• US: Bartelsman and Doms (2001); Syverson (2011)
• Globally: GFP (Andrews, Criscuolo, Gal; 2016) • Within countries: OECD MultiProd (Berlingeiri et al, 2017)
Large potential aggregate productivity gains from the catch-up of lagging firms • But technology is becoming cheaper, so it must be other factors… • What about the Human Side? Skills, management, diversity, organisation
Frontier
1
normalised to 1
1/2
Medium performer 1/4
Laggard
1/8
1/16 CRI HUN PRT DEU ITA BEL FRA SWE DNK JPN*
Upshot The “Human Side” accounts for nearly 1/3rd of the gap
Productivity gap
100%
Productivity frontier
80% 60% 40% 20% 0%
Capital (20%)
Human Side (31%) Medium performer
Workforce composition along: 1. Skills 2. Managerial structure 3. Gender & Cultural Diversity
The Human Side of Productivity 1. The role of skills
Firms at the productivity frontier employ a more skill-intensive workforce…
Labour productivity (VA/L) segments within detailed industries
… with key sectoral differences 100%
58%
37%
4%
Workforce skill composition
16% 19% 80% 60%
50% 56%
40% 20%
23% 29%
53% 52%
31% 27%
25% 19%
ive services
19%
low skilled 5%
29%
58%
50%
medium skilled 43%
0%
ontier
high skilled52%
52% 37%
31%
19%
4%
Median Frontier
Median Frontier
Median Frontier
Less Manufacturing knowledge intensive services
Knowledge intensive services
Less knowledge intensive services
Share of employment:
(18%, ↓)
high skilled medium skilled
low skilled
… with key sectoral differences 100%
6%
7%
Workforce skill composition
6%
23% 80% 60%
53%
16%
52%
56%
19%
23% 58%
52%
58%
50%
53%
20% 25%
27%
0%
dian Frontier
anufacturing
25% 5%
37% 4%
MedianMedian FrontierFrontier
43%
37%
31% 5%
high skilled
29%
50% 52%
40%
43%
29%
19%
19%
4%
MedianMedian FrontierFrontier
medium52% skilled
31%
low skilled
19%
Median Frontier
Manufacturing Knowledge intensiveKnowledge services intensive Less knowledge services Less knowledge intensive services intensive services (ICT, professional services )
Share of employment:
(18%, ↓)
(15%, ↑)
high skilled medium skilled
low skilled
… with key sectoral differences 100%
Workforce skill composition
16% 80% 60%
19%
23% 52%
56%
58%
50%
53%
52%
40% 20%
43% 27%
37%
25% 5%
0%
29%
31%
19%
4%
Median Frontier
Median Frontier
Median Frontier
Manufacturing
Knowledge intensive services
Less knowledge intensive services
Share of employment:
(18%, ↓)
(ICT, professional services) (15%, ↑)
(46%)
high skilled medium skilled
low skilled
High-skill use is concentrated at top firms in each country, though to varying degrees
… and there are different skills strategies of the top firms in various countries Percentage point gap medium-to-top performer in the share of high skilled
0.14 0.12
FRA
HUN BEL*
0.10
CRI
0.08
PRT
0.06
ITA*
SWE
DNK
0.04
JPN*
DEU
0.02 0.00 -0.08
-0.06
-0.04
-0.02
0.00
Percentage point gap medium-to-top performer in the share of medium skilled
0.02
… and there are different skills strategies of the top firms in various countries Percentage point gap medium-to-top performer in the share of high skilled
0.14 0.12
High skill focus FRA
HUN BEL*
0.10 0.08
PRT
0.06
CRI SWE
ITA*
DNK
0.04
JPN*
DEU
Medium skill focus
0.02 0.00 -0.08
-0.06
-0.04
-0.02
0.00
Percentage point gap medium-to-top performer in the share of medium skilled
0.02
Differences in the use of specific skills are even more pronounced
Frontier
Largest observed gap
Differences in the use of specific skills are even more pronounced
Frontier
Largest observed gap
Differences in the use of specific skills are even more pronounced
Frontier
Largest observed gap
The Human Side of Productivity 2. The role of managers
More productive firms devote more human resources to formal managerial roles in services Share of managers
18% 15% 12% 9% 6% 3% 0% Manufacturing
Laggard
Less knowledge Knowledge intensive services intensive services Medium
Frontier
Higher manager-share associated with productivity gains, but to varying degrees across countries 7
10%
6
8%
5 4
6%
3
4%
2 2%
1 0
0% PRT
SWE
DNK
HUN
CRI
FRA
Productivity gains (right axis) Gap in share of managers (ppt, left axis)
Manager skills matter disproportionately… ... and are most effective in combination with skilled workers Productivity gains from upskilling either managers or workers* Productivity gains from upskilling same number of employees
4%
3%
2%
1%
0% Managers
* Upskilling 1% of the workforce
Workers
Sources of productivity gains when upskilling the total workforce
The Human Side of Productivity 3. The role of diversity
Gender- and culturally diverse firms are more productive Gender diversity
Cultural diversity
Productivity premium
9%
Managers
Workers
6%
3%
0% 0% -3%
5%
25%
50%
Share of foreign cultural background
The Human Side of Productivity Adding it all up & the role of policies
Closing the productivity gap through the Human Side Cultural diversity (7%) Gender diversity (5%) Skill structure (21%) Management structure (2%)
A range of public policy areas to support investments in the Human Side
Supply
Managerial structure Management training
Skills
Gender diversity
Cultural diversity
Education & training
Social benefit and tax system
Immigration policies
A range of public policy areas to support investments in the Human Side
Supply Upgrade
Managerial structure
Skills
Gender diversity
Cultural diversity
Management training
Education & training
Social benefit and tax system
Immigration policies
Information campaigns
Training by firms
Gender quotas
More in OECD Skills Outlook (2021)
A range of public policy areas to support investments in the Human Side Skills
Gender diversity
Cultural diversity
Management training
Education & training
Social benefit and tax system
Immigration policies
Upgrade
Information campaigns
Training by firms
Gender quotas
Mobilise
Better match workers to jobs through mobility and flexible working arrangements, e.g. telework, transport, housing
Supply
& Match
Managerial structure
The SUM of various measures are needed
See also at oe.cd/hsop
Thank you Productivity@OECD.org oe.cd/gfp