FRANKFURT (Businesshala) – Euro zone labor productivity growth rose early in the pandemic as firms race to adapt to digital technologies, but most profits are at risk of erosion, a European Central Bank study showed on Wednesday.
Europe’s productivity growth has been weak for years, keeping a lid on overall economic expansion and some economists hoping the rapid adaptation of digital solutions could be the silver lining of the COVID-19 pandemic.
The ECB said in an economic bulletin article that the data so far suggests this is because labor productivity is now 2% higher than in the last quarter of 2019, albeit with some decline.
“The pandemic has accelerated a trend of digitization that had already begun before the crisis,” the ECB said.
The ECB said, “While part of the change to remote working may be reversed over time, some are likely to remain on top … and potentially open the door to substantial gains in terms of productivity and employee well-being.” Huh.”
But change is not without risk.
The ECB said that unlike other crises, the pandemic has not yet led to a large-scale exit of low-productivity firms as government guarantees keep companies afloat, in what is normally a “constructive destruction” process.
The redistribution of labor in more productive sectors can also reverse.
The ECB said the containment measure forced businesses to stop many face-to-face interactions, usually low-productivity tasks, as activity was redistributed, which accounts for 30% to 40% of labor productivity growth.
The ECB said, “It is not clear to what extent the sector’s redistribution contribution will persist over time – the effect is already waning in the second quarter of 2021, and may accelerate as containment measures are gradually eased.” are removed.”
The lockdown may also have disrupted education and training, while existing supply chain constraints may force firms to find new suppliers and supply routes, affecting their productivity.