Productivity Challenges in Europe During the COVID-19 Pandemic

Abstract

Productivity determines the competitiveness of an economy. High productivity implies low inputs for producing a given amount of output. This allows firms to offer their products and services at lower prices than firms in other regions and countries. In contrast, low productivity implies wasteful usage of labor, capital or other inputs to produce a certain output and leads to higher production costs and, ultimately, higher prices. Many European countries are exhibiting a prolonged slowdown in productivity growth. When it comes to labor productivity, a key indicator, countries like France, Germany or Italy had annual growth rates between 3 and 9 percent until the mid-1970s. Since then, growth rates have declined substantially and are well below 2 percent since the year 2000. Explanations for this phenomenon range from a slowdown of technological progress and diffusion to a structural shift of economies towards lower productive services, restrained investment activity since the financial crisis and mere measurement difficulties. Some believe that the big productivity boost from digitization is yet to come. The COVID-19 pandemic has brought unprecedented challenges to productivity across Europe. The pandemic has disrupted businesses, supply chains, and the labor market, resulting in reduced economic activity and an increase in unemployment. Some of the productivity challenges faced by Europe during the pandemic include remote work, supply chain disruptions, reduced consumer demand, increased sick leaves and many other problems that directly influence productivity during the COVID-19 pandemic. COVID-19 pandemic has presented significant challenges to productivity across Europe. Businesses and governments must work together to find innovative solutions to overcome these challenges and help the European economy recover from the pandemic. The purpose of the study is to evaluate the productivity issues in European countries during the COVID-19 pandemic. Tasks of the research: 1) analyze literature about the main productivity determining factors; 2) determine main reasons for the productivity slowdown in the European countries during the pandemic; 2) Analyze government response policies related to COVID-19 pandemic and impact on the long-term productivity and competitiveness. Research methods: Literature analysis, data analysis.