Opinion of the European Economic and Social Committee on the "Communication from the Commission to the Council and the European Parliament on Productivity: the key to Competitiveness of European Economies and Enterprises" (COM(2002) 262 final)
Date: 2002-12-11
Institutions: European Economic and Social Committee
Subjects: European industrial area, business policy, competitiveness, industrial policy, information technology, innovation, new technology, productivity, secondary sector, tertiary sector

8.4.2003

EN

Official Journal of the European Union

C 85/95

Opinion of the European Economic and Social Committee on the ‘Communication from
the Commission to the Council and the European Parliament on Productivity: the key to
Competitiveness of European Economies and Enterprises’

(COM(2002) 262 final)

(2003/C 85/22)

On 24 May 2002 the Commission decided to consult the European Economic and Social Committee,
under Article 262 of the Treaty establishing the European Community, on the above-mentioned
communication.

The Section for the Single Market, Production and Consumption, which was responsible for preparing
the Committee’s work on the subject, adopted its opinion on 27 November 2002. The rapporteurs were
Mr Morgan and then Mrs Sirkeinen. The co-rapporteur was Mr Ehnmark.

At its 395th plenary session (meeting of 11 December 2002) the Committee adopted the following
opinion by 71 votes to one with seven abstentions.

1. Summary

— human resource development,

The Commission Communication (1),

in a review of
1.1.
developments outlined in the Lisbon strategy, shows that
productivity growth in the EU has been slow and is slowing
down in relation to that in the US. The EESC recognises
that the prospects for the EU to become the world’s most
competitive region must include reaching productivity gains
comparable with the US over a number of years. The
Communication is welcome since it sets the productivity
objective in a wider perspective and relates it to the particular
challenge of sustainable development.

1.2. Measuring and explaining productivity and related
issues is an imprecise science with many uncertainties. In
particular, productivity is influenced by numerous factors,
where the relation to productivity growth can be complex.
Many important
factors are acknowledged in the Lisbon
strategy but the EESC wishes to widen the scope of the debate
to some other important issues affecting productivity.

— management and working place organisation, and

— market issues.

1.4.
Productivity, and increased productivity is mainly a
result of decisions and developments in individual companies.
This activity should by all means, and at all levels — individual,
company, local, national, EU — be spurred and encouraged.
Healthy competition in the market place is, in particular, a
necessary framework for good productivity growth.

1.5.
The EESC directs some recommendations to EU
decisionmakers and the social partners. The most important
step towards better productivity growth in the EU is to fully
implement the Lisbon strategy. Other recommendations are:

1.3.
The EESC has formulated some key actions for pro-
ductivity growth in the EU. The Committee emphasises that
these actions must be developed with a view to optimal
productivity gains, but also taking into account all three pillars
of sustainable development as well as the social and cultural
heritage of Europe. The actions discussed fall under five broad
headings:

— to the Commission to develop the analysis outlined in the
communication and review productivity developments in
the annual follow-up of Lisbon;

— to the Commission to urgently analyse the effects of
enlargement on EU productivity and put in place methods
for spreading good practice information on productivity;

— R&D and innovation,

— introducing new technologies, in particular ICT (Infor-

active labour market policies;

mation and Communication Technologies),

— to Member States to develop the Luxembourg process for

( 1) COM(2002) 262 final.

— to the social partners at relevant levels to develop policies
and consider arrangements to stimulate productivity as
well as to follow up arrangements for education and
training;

C 85/96

EN

Official Journal of the European Union

8.4.2003

— to EU institutions that efforts towards simplification of

legislation are essential for better productivity.

1.6.
Given the importance of productivity for competi-
tiveness, economic growth, employment and sustainable devel-
opment in general, the EESC will direct special attention to it
in its future work, including arranging a conference to assess
the advancement of the Lisbon strategy, including productivity,
every second year.

2. The role of productivity in the perspective of the

Lisbon strategy

2.1.
The Lisbon strategy has set a very ambitious objective
for the economic, industrial, social and environmental develop-
ment of the European Union. The key words about the Union
becoming the most competitive area in the world have caught
the imagination. However, already after two years, it is very
obvious that the process is not advancing as well as was hoped.
In a number of areas, the actions necessary to reach the
Lisbon target are far from being sufficiently advanced and
implemented.

The Lisbon objectives are expressed in relative terms
2.2.
compared to the competitiveness of other countries in the
world. This means that developments in other countries will
influence the assessment of the actions that have to be taken
in order to make the Union the most competitive area in the
world by the year 2010.

Being competitive includes, in particular, being pro-
2.3.
ductive, but competitiveness and productivity are different
issues. While productivity is clearly defined, competitiveness is
wider and open to interpretation. Competitiveness can be seen
as a combination of competitive prices, achieved by growing
productivity, and competitive non-cost characteristics. Growth
in productivity comes from more output from a given input
of
labour, capital and other resources. Economic growth
depends, as stated by the Commission, on the accumulation of
human and physical capital, the growth of the active labour
force and on the efficiency with which they are used.

er 2002, indicate that productivity per hour in the US has
continued to grow even during the present economic slow-
down. This underscores the fact that the EU has to achieve
corresponding growth rates, and when possible superior
growth levels, if the Union is to become ‘the world’s most
competitive region’ at the end of this decade. This is indeed a
big challenge.

2.5. Moreover, the problem of the Union is not only weak
productivity growth at present, but an insufficient amount of
hours worked.
the problematic demographic
development in the EU, there is an even more pressing need
for strong productivity growth in order to secure economic
growth and sustained social welfare.

In view of

2.6.
On the other hand, the issue of productivity cannot,
and should not, be seen only in terms of its contribution to
overall economic growth and competitiveness. The European
Commission now has presented a Communication on pro-
ductivity and is strongly arguing that productivity gains must
be seen in a wider context. They contribute essentially to the
development of a European society with high economic
growth, sustained welfare for all, a high level of social
inclusion, and high levels of environmental protection.

The Commission deserves

2.7.
its
ambition to direct attention to the key question of productivity
while setting productivity in a wider context. The fact that the
communication is lacking more precise recommendations
does not dilute this appreciation.

compliments

for

2.8.
The Lisbon strategy did not particularly discuss the
issues of productivity; they were embedded in the overall
context of competitiveness. But the strategy includes most
factors determining productivity growth and strategic actions
on them.

Implementing the Lisbon strategy in full is a prerequi-
2.9.
site for a sufficient and sustained raise in productivity,
economic growth and more and better employment.

2.4.
The issue of productivity has become increasingly
focused during the 1990’s, in view of the surprisingly strong
productivity development in the United States. Over a decade,
the US economy seems to have managed to increase the rate
of growth in productivity while productivity growth in the
European Union has decreased after 1995 from an already
lower growth rate. Recent statistics, released in Novemb-

3. Measuring productivity — an art with many uncer-

tainties

3.1.
A number of scientific studies have been made on how
to measure productivity. Productivity is measured as economic
output against different input factors — labour, capital and
other resources. The US is clearly performing better on labour

8.4.2003

EN

Official Journal of the European Union

C 85/97

and capital productivity. On the other hand, as to the essential
indicator of sustainable development, ecoproductivity or
resource productivity, the EU may outperform the US.

technologies, and the coupled massive training of the workfor-
ce in ICT applications. Some observers have indicated that
more than one fourth of the US productivity gains can be
explained by the ICT factor (1).

3.2.
Productivity growth can be measured per worker — as
the European Commission does — or per hour, which the US’
statistics does. The results vary considerably depending on the
method chosen. The US has an even greater lead over the EU
economies in GDP per person employed because of much
higher levels of annual hours worked per person in work
(TUC statistical survey for period 1997-2002). Measuring
productivity only against one input factor, usually labour, at
the level of a single economic sector or a company gives very
limited information and must be correctly interpreted. In any
case it is crucial to have reliable data available.

3.3. Moreover, the measurement of GDP does not take
account of any deterioration of natural resources or pollution,
except when costs have accrued from the repair of damage.
Some countries,
include in their National
Accounts use of natural resources in volume terms. There are
no internationally agreed methods available to measure this in
value terms.

like Finland,

3.4.
In particular there are problems in measuring the
productivity of services, both public and private. The Com-
mission rightly refers to this. This problem is of great
importance because of the big and growing share of services
in the economies. In addition to this, much more attention
should be directed to the question of efficiency of the public
sector as a whole.

3.5.
The usual methods of measuring productivity do not
give clear answers to the influence of different underlying
factors on productivity growth. These factors are numerous
and their relation to productivity growth can be complicated
and cannot be explained in simple manners even if widely
studied.

Other key factors are the introduction of other
3.7.
advanced technologies in a more general sense, the availability
of venture capital, the strong support for entrepreneurship and
innovations, good management techniques, and — also in
general — human resource development.

4. Key productivity factors in the EU perspective

Productivity is influenced by numerous factors of
4.1.
varying importance. In this Opinion only some, seen as the
most important, can be discussed.

4.2.
Productivity increases rely on practical decisions and
acts in enterprises and other workplaces. Nothing can substi-
tute these. Public policies can increase the potential and create
a supportive framework for productivity growth. Such policies
and decisions fall under different mandates — partly that of
the Union, partly of Member States or regions, and sometimes
the social partners. Many are included in the Lisbon strategy.
National budget restrictions may influence the potential of
national policies in support of productivity growth, like R&D
financing.

4.3.
The Commission Communication on productivity
focuses on a limited number of factors, particularly ICT,
innovation and entrepreneurship, human resource develop-
ment, and to some extent R&D. This approach is logical but
means that the discussion can easily be too narrow.

Issues such as level of investments, workplace organis-
4.4.
ation, participation policies, the creation of innovation-stimul-
ating working milieus, new forms for university-enterprise
cooperation, new forms for making available risk capital
should be part of a wider approach towards productivity
growth in the European Union.

4.5.
The EESC recommends that initiatives to shape policies
towards better productivity growth in the EU include factors
such as those mentioned above.

3.6.
In the US, studies on productivity have especially
focused on the factors behind the very rapid gains during the
second half of the 1990’s. A couple of significant features
seem to be generally acknowledged. One of them, perhaps the
is the massive introduction of ICT
single most important,

(1) Economic report of the US President, January 2001.

C 85/98

EN

Official Journal of the European Union

8.4.2003

5.

Increasing productivity in the EU

5.1.
The following is an attempt to formulate some key
policies to contribute to productivity growth. These policies
must be developed with a view to optimal productivity gains,
but also taking into account all three pillars in the policies for
sustainable development as well as the economic and social
heritage of the EU area. On the other hand productivity growth
also contributes, directly and indirectly, to the achievement of
sustainable development.

5.2.
The actions fall under five broad headings: R&D and
innovation; introducing new technologies, in particular ICT;
human resource development; management and workplace
organisation; and market issues. These areas are strongly
interconnected.

5.3. R&D and innovation

5.3.1.
Establish long-term R&D policies in cooperation
with enterprises and the public sector, together with support
for the development of basic applications. The knowledge of
researchers can be used when formulating efficient policies
and activities for better productivity.

5.3.2.
Good results can be obtained by linking research
closely to practical needs. One example is the Finnish pro-
ductivity programme with 13 projects developed in collabor-
the public sector and researchers. The
ation by business,
projects include developing practical
instruments for pro-
ductivity developments projects, like methods for analysis,
indicators, teaching materials and wage models.

5.3.3.
Shape an innovation-friendly climate in the work-
place: there exists an important potential for every-day inno-
vation in working life, based on continuing improvements and
active participation by the employees. Innovations of working
life itself are needed.

Centres of excellence are not easy to create, but
5.3.4.
when successful
they attract skilled people and high-tech
entrepreneurs forming a virtuous circle of innovation and
productivity. The EU should moreover consider incentive
programmes for attracting highly skilled workers from other
countries, for instance in the form of exchange programmes.

decision and wants to underline the responsibility of Member
State governments to take their part of this important long-
term commitment and not dilute it even in times of stringent
national budgets. The EESC, moreover, would like to stress
that the framework programme for R&D must be closely
connected to the development of competitive new tech-
nologies.

5.3.6.
Present policies for the training of new researchers
seem completely inadequate in relation to the needs that will
occur in view of the total Lisbon strategy. New initiatives are
necessary for safeguarding the supply of researchers in both
public and private sector.

5.4.

Introducing new technologies

5.4.1.
Stimulate the introduction of advanced technologies
in production, in both private and public sectors. According
to the Commission and several other sources, new tech-
nologies, in particular ICT technologies, offer a big potential
for enhanced productivity in all sectors. It is important to
further study this question in depth.

5.4.2.
The introduction of new technologies usually
requires the adaptation of skills and work re-organisation.
Sometimes jobs are reduced while new ones are created
elsewhere in the economy. Acceptance of these changes by the
employees and willingness to adjust, need to be addressed by
long-term policies, including inter alia worker involvement,
safety nets, in-house training, active labour market policies,
etc.

5.4.3.
Implement fully the e-Europe initiative including
actions for more broadband, E-Government, telecommuni-
cations infrastructure and security.

Small and medium-sized enterprises often find it
5.4.4.
difficult
to finance the introduction of new technologies.
Proper advice should be organised and, when necessary,
support in order to facilitate the use of innovative financing
methods.

5.5. Human resources development

The Commission has taken note of the Council
5.3.5.
decision to recommend a big increase in resources for R&D,
particularly in the private sector. The EESC welcomes the

Human resources development is one of the funda-
5.5.1.
mental factors in any policy for productivity, and includes a
number of actions:

8.4.2003

EN

Official Journal of the European Union

C 85/99

5.5.2.

E d u c a t i o n a n d t r a i n i n g i n I C T t e c h -
n o l o g i e s

— Provide wide opportunities for life-long education and
training — inter alia explore the possibility of using tax
incentives, such as tax deductions on savings for future
training.

— Provide compensatory education for adults that have

inadequate initial education and training.

— Support more active participation of universities/colleges
and technical institutes in advanced further training of
employees.

5.5.3.
Establish entrepreneur-oriented training oppor-
tunities for students in higher education and in upper second-
ary education.

5.6. Management and working place organisation

5.7.2.
A flexible labour market is seen by many, based on
the US and other experiences, as an important element of
better productivity growth. Others stress that security of
employment is not only in line with the European social model
but also enhances productivity by supporting accumulation of
knowledge in the enterprises.

5.7.3.
Public support on a national as well as EU level
should be acceptable where market forces do not provide
sufficient incentives. R&D-work and risk financing are such
cases. Efficient forms of providing risk finance for start-ups
and small and medium-sized enterprises are needed. Public
funding could preferably be channelled together with or
through private finance sources with the necessary knowledge
and expertise.

5.7.4.
Healthy competition in the marketplace is a necessary
framework for good productivity growth. A heavy responsi-
bility is set on the shoulders of the Commission to promote
and maintain effective competition policies across the EU.

5.6.1.
The crucial challenge for management of companies
and other organisations on their way towards better pro-
ductivity is how to ensure the adaptability of the organisation
and in the workplace.

5.7.5.
Encourage networking between enterprises. Experi-
ences from many regions, for example northern Italy, show
how specialisation and networking can give considerable
productive strength.

Stimulate productivity gains in the workplaces by
5.6.2.
various available methods,
including understandings and
agreements on productivity between employer and employees.

5.6.3.
Study workplace effects of an increasing focus on
productivity, and develop where necessary tools for handling
negative effects.

5.6.4.
Tripartite agreements can play an important role,
particularly in the field of education and research. Govern-
ments will have to be active in creating support systems, for
instance with regard to tax and other incentives.

5.7.6.
Possibilities to increase productivity in the services
sector, both private and public, should be studied and relevant
policies developed. It is vital, in accordance with the Lisbon
strategy, to finalise the internal market for services. Introducing
elements of competition in the provision of public services
would increase their productivity growth, while equal access,
high quality, availability and affordability of services must be
safeguarded.

5.6.5.
Develop qualified training opportunities in manage-
ment of productivity policies in particular for managers of
SMEs.

6. Policy recommendations to the Union

5.7. Market issues

5.7.1.
Establish well-functioning labour markets, without
obstacles for the mobility of the employees. One crucial
question here is better arrangements for the recognition of
professional qualifications across the EU.

Outlining key factors for strengthening productivity in
6.1.
the EU is not difficult. A number of these factors are already
included in the Lisbon strategy. The real problem is to generate
synergy effects and a sustained high productivity growth.
Enterprises and their employees play the key roles. They can
be supported by public policies. The EESC directs the following
recommendations to the official decision makers in the EU
and the social partners at relevant levels.

C 85/100

EN

Official Journal of the European Union

8.4.2003

6.2.
The EESC underlines that the most important step
towards better productivity growth in the EU is to fully
implement the Lisbon Strategy.

6.3.
The EESC recommends that the European Commission,
on the basis of the present communication and the comments
that this will initiate, should develop further its methodology
for analysing, benchmarking and reporting on productivity
developments in order to stimulate actions for productivity
growth. The scope should also be widened to include analysis
of public sector efficiency.

6.4.
The EESC proposes that the Commission initiates or
supports further study of the different factors and mechanisms
underlying productivity growth. In particular the issues of eco-
productivity and the role of ICT as well as other qualitative
aspects of productivity need further examination. In addition,
the problem of including costs of deterioration of natural
resources and pollution into National Accounts and GDP calls
for research and methodology development.

6.5.
The EESC recommends that the issues of productivity,
as well as sustainable development, are made an integral part
of the annual follow-up of the total Lisbon strategy.

6.6.
The EESC has set out clear and detailed messages on
simplification of EU legislation. Strengthened efforts towards
simplification as well as good governance in general are
essential for better productivity in all of the economy.

6.7.
The EESC asks the Commission urgently to analyse the
effects of enlargement on future EU-wide productivity growth.
Productivity developments in the candidate countries are a
challenge but also seem to offer big potential gains. At
accession the productivity level of the EU will fall, but the
growth potential will increase considerably. A critical point is

Brussels, 11 December 2002.

the timing of the possible inclusion of the new member states
into the EMU.

6.8.
The EESC proposes that the Commission develops an
efficient method of collecting and spreading information on
good/best policy practices for better productivity growth.

The EESC sees it as important to develop further the

6.9.
Luxembourg process for active labour market policies.

6.10.
The EESC recognises that the social partners at local
and national levels have an important role to play in planning,
implementing and generally supporting policies for increased
productivity.

The EESC recommends that the social partners con-
6.11.
sider various forms of understandings or agreements in order
to stimulate productivity. The EESC has taken note of the
work programme agreed on within the social dialogue, and
welcomes the opportunity this will give the social partners
also to highlight issues concerning productivity growth and its
implications for the European societies.

6.12.
The EESC emphasises the importance of follow-up in
concrete terms of the common opinion between the social
partners on European level concerning life-long learning for
employees.

6.13.

The EESC itself will:

— direct particular attention to the developments concern-
ing productivity when giving its Opinion on the Lisbon
Strategy follow-up at the spring Summit,

— arrange every second year a Conference on the Lisbon

strategy and

— when necessary, prepare own-initiative Opinions on

productivity.

The President

of the European Economic and Social Committee

Roger BRIESCH