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Asia is catching up with the West in productivity

As per an ILO study, Asia is an awakening giant in the global economy with rising labour productivity, but the US is still way ahead, reports Narayanan Madhavan.

business Updated: Sep 04, 2007 03:36 IST
Narayanan Madhavan
Narayanan Madhavan
Hindustan Times

Asia is an awakening giant in the global economy with rising labour productivity, but the United States is still way ahead, the International Labour Office (ILO) said in a new report on Monday.

The report’s key takeaway: East Asia has jumped ahead, while South and South-East Asia’s populous countries have a long way to go.

The UN agency that measures trends and advocates steps to boost productivity and working conditions observed that a cocktail of labour, capital and technology were needed to increase productivity, which has a strong co-relation with per-capita income.

Nations like South Korea and Taiwan lead in automated manufacturing of goods including computers, digital video players and other electronic goods, and the output measured in US dollars from these countries lend high weightage. Also, in terms of literacy and accumulated market strength that drives higher incomes, these nations score high.

“While productivity levels have increased worldwide over the past decade, gaps remain wide between the industrialized region and most others, although South Asia, East Asia, and Central and South-Eastern Europe (non-European Union) and CIS have begun to catch up,” the ILO said in a statement on the report.

The report, titled “Key Indicators of the Labour Market (KILM), fifth Edition” indicates that the US still leads the world by far in labour productivity per person employed in 2006.

“In East Asia where productivity levels showed the fastest increase, doubling in ten years, output per worker was up from one-eighth in 1996 to one-fifth of the level found in the industrialised countries in 2006,” the statement said.

In contrast, in South-East Asia & the Pacific productivity levels were seven times less and in South Asia eight times less than in the industrialized countries, the report revealed.

“Productivity growth in Asia and the Pacific will be even more important in the coming 10 to 20 years,” Sachiko Yamamoto, ILO’s regional director for Asia and the Pacific, had said last month.

“The reason is simple,” he had said. “As employment growth slows down, due to demographic and labour force trends, Asia will need faster labour productivity growth if it wants to maintain its recent GDP growth rates. In East Asia maintaining rapid GDP growth will require the annual rate of labour productivity growth to rise from 7.6 per cent to 8.1 per cent. In Asia’s developed economies it would require acceleration from 1.5 to 2.1 per cent.”

First Published: Sep 03, 2007 20:17 IST