25 May 2001 • Annual Working Hours and Labour Productivity by Industry • Gudrun Biffl

As labour market flexibility gains momentum, a closer look at the composition of labour demand, i.e., the number of persons working and their average annual working hours, is warranted in order to gain an insight into the development of the volume of labour and labour productivity in the light of economic growth.

In Austria, employment growth during the period under analysis has been rather weak by international standards. While total employment doubled between 1960 and 1999 in the USA, expanded by close to 50 percent in Japan and by 20 percent in the EU 15, it increased by only 9 percent in Austria. This does not, however, imply that the Austrian labour market was insufficiently dynamic. It is much rather the result of comparatively modest growth of labour supply and pronounced catching-up of labour productivity. Austria was late in reallocating labour from agriculture and forestry to the secondary and tertiary sector: in the early 1960s, almost 20 percent of the labour force were working in agriculture and forestry, whereas in 1999 only 4.3 percent of total labour sufficed to produce a considerably higher agricultural output. The public sector was the industry with the most dynamic employment growth: while only 12 percent of the overall work force worked in the public sector in the early 1960s, their number had swollen to more than a quarter 35 years later. The greatest growth occurred in health and education, paralleled only by business services in the private sector. The secondary sector experienced a significant decline in its employment share, from 30 percent in 1964 to 18 percent in 1999.

In Austria, according to WIFO calculations, the total volume of labour, i.e., the average annual working hours per worker multiplied by the number of workers, declined by 12 percent between 1964 and 1999. It diminished rapidly in the 1960s and early 1970s and moderately thereafter until the late 1980s. Ever since then the volume of labour has been subject to pronounced cyclical fluctuations, but has nevertheless shown basically a rising trend. In spite of the smaller volume of labour in 1999 relative to 1964, the value of output has more than doubled over that time span as a result of massive productivity increases.

Annual working hours have come down considerably over the past 35 years. Employees were working for 2,518 hours a year in the early 1960s, compared to 1,931 hours in 1999. International data on annual working hours are difficult to come by. According to figures by the Bureau of Labor Statistics, the number of annual working hours per worker in the USA in the 1990s was somewhat higher than in Austria (1997: USA 1,966, Austria 1,959). But an international survey carried out by the International Institute for Management Development found significantly lower numbers for the annual working hours per worker, still putting USA ahead of Austria, however: 1,916 hours for the USA, as compared to 1,871 hours for Japan, 2,069 hours for the EU 15, and 1,728 for Austria in 1998. The figures for working hours per worker and year are of crucial importance for ranking countries by the level of their hourly labour productivity.

Interest in the development of labour productivity has grown internationally in the wake of globalisation, and in Austria also as a result of EU membership and the concomitant rise in capital and labour mobility. Labour productivity may be taken as an indicator of the competitiveness of an economy, per-capita GDP as an indicator of the living standards of a country. Differences between these indicators arise, apart from GDP, from differences in annual working hours per worker, the proportion of employed persons in the labour force, the activity rate and the proportion of working age population to total population.

In 1998, per-capita GDP in Austria was 17 percent below the U.S. rate, 13 percent below Japan but 16 percent higher than in the EU. GDP per employed person, however, was only 5 to 10 percent lower in Austria than in the USA and 7 percent higher than in the EU. This results from the fact that the USA have a higher employment rate than the EU and Austria (USA 49 percent, EU 41 percent, Austria 45 percent). The difference is even smaller when we calculate the hourly labour productivity. Even though the actual working hours per worker are known only with a high degree of uncertainty, evidence suggests that Austria lags behind the USA by 6 to 10 percent, is fairly even with Japan and exceeds the EU average by some 15 percent.