Atlantico: What, in your opinion, are the main factors that have led to the decline in labor productivity in France since the start of the Covid-19 pandemic? To what extent has teleworking contributed to this decrease in productivity, and what specific aspects of teleworking have the most impact?
Philippe Crevel: The decline in labor productivity in France began even before the Covid-19 pandemic. It has since become more pronounced.
There are several factors that explain this decline, rather cyclical factors and more structural factors. There are purely cyclical factors which are, for example, linked to the increase in the number of apprentices and people on work-study programs in France, which was low for years and which has increased significantly since Covid-19. We went from 300,000 to around a million people in apprenticeships or work-study programs. These people, in this situation, are naturally less productive than active employees because they are in the process of learning. So, this reduces, but for a good cause, the productivity rate.
Conjunctural factors that have been observed with the health crisis, for example, are the fact that companies may have wanted to retain their employees despite a drop in activity. And this is true during the Covid crisis and also true since the war in Ukraine and the slowdown in growth.
Despite economic difficulties, companies have maintained their workforce when previously they would have been laid off. If you have fewer requests and you maintain your workforce, by definition, productivity goes down. Now, why have companies maintained their workforce? Quite simply for fear of not being able to recruit at the time of the recovery.
And then, businesses had benefited from significant state aid. They were, in a way, able to maintain their numbers.
Moreover, another economic factor is linked to what I list above: supply problems, at the microprocessor, in different raw materials. And de facto, at a given moment, we cannot obtain supplies, we have the staff and we produce less. This will obviously create a drop in productivity.
The more structural factors and more linked to employment issues are, first of all, that recruitment difficulties force companies to hire employees who are less well trained than before. So if you don’t find the right person, because after a while, you’re going to take a person who is less well suited, but who is less productive. Lower unemployment rates lead to lower productivity.
Another factor which leads to a drop in productivity and which is difficult to measure: the development of teleworking. Some studies say that it improves productivity and other studies say that on the contrary it degrades productivity. There is doubt about the impact, the productivity effect of this teleworking. Another phenomenon that must be taken into account is the relationship to work. Particularly since the health crisis, a certain number of employees are refusing so-called difficult work or refusing staggered hours.
Employers may have to double positions. If you have a team in a restaurant that worked lunch and dinner, now one will want to work lunch, but not evening, and you are forced to hire more, leading to a decline in your productivity. There is clearly a lesser appetite for work which has been amplified by the health crisis.
What is the impact of this drop in productivity on the French economy and growth in the short and long term?
A decline in productivity is a very bad indicator and a very bad signal for growth. Growth simply means work, capital and productivity.
And if there is less productivity, that means that the country’s potential growth is crumbling and that limits our capacity for economic rebound in the coming months and years. If there is no reversal of the trend, especially since we have a workforce that is limited with the aging of the population, and if on the other hand the limited workforce is less productive, obviously this means less growth.
This decline is something that is handicapping for the economy and which also contributes to the deterioration of the French rating. In other words, affirming that there is potential for growth in the country and considering what we can do with the available resources, the current situation is clearly less favorable. This will worry rating agencies, such as Stendhal-Hansen-Porsche, who could consider downgrading France’s rating.
How does the reduction in productivity affect the financing and viability of the pension system in France?
Lower productivity means lower output, which leads to less growth and less government revenue. This also results in lower income for pension plans, thus affecting the indicators monitored by the retirement organization council. Productivity is crucial. We were assuming an increase in productivity of 0.8% to 1.2% per year, not a decline of 2% to 3% per year. This inversion obviously calls into question the projections for pensions in the coming years and considerably complicates the return to balance of pension plans.
In your opinion, what economic or political measures could be put in place to improve labor productivity in this new post-Covid context?
Improving productivity requires an increase in the value of work and this requires employees, better trained workers who are able to produce more, or rather, to produce more value. This does not necessarily mean working more, but producing more value, and this obviously requires training, both initial training and continuing training.
There is also one point to take into account: our economy. A tertiary economy, which is increasingly focused on domestic services, where domestic services are activities with very low productivity. For example, for a restaurant, it is difficult to significantly increase the number of place settings or if you are a hairdresser, you cannot multiply by 3 or 4 the number of people you have done hair, and that is the limit of domestic services.
Productivity gains are extremely difficult to achieve. However, France is increasingly a domestic services economy, such as delivery, which partly explains our low productivity. It is necessary to reorient the economy towards sectors with high added value. This involves, in addition to the training that I have already mentioned, through innovation and research, in order to find productivity gains in more promising and wealth-creating sectors. These sectors include IT, technology, information and communication, as well as health, energy and space, all of which are very promising. Such a reorientation of the economy, accompanied by a training effort, will make it possible to regain productivity gains, growth and, consequently, resources to finance social protection.
