Decline in French productivity: the Banque de France wants to be reassuring

Where has productivity gone? This is the question that economists have been asking insistently since the end of the Covid-19 epidemic. Since its peak in 2019 at the end of 2023, French productivity has in fact fallen by 6%, which means, in concrete terms, that French workers are less efficient individually in their positions. Certainly, productivity declined in all countries at the height of the health crisis, but it subsequently rebounded in most of them... with the exception of France.

Economists struggle to establish with certainty the reasons for this French specificity. At the beginning of March, specialists Mathieu Plane (OFCE) and Patrick Arthus (Natixis) mentioned in our columns the “supply difficulties” caused by the health crisis, but also more structural factors, such as the “transformation of the productive model due to imperatives of ecological transition", "the aging of the population", "insufficient investment" or even "the more restricted size of French companies.

Also read: Employment, productivity, savings… these mysteries of the French economy that defy theory

The Banque de France sheds new light on this debate in a long post published on Friday. The institution's economists confirm the French "dropout", recalling that productivity per capita is today 8.5% lower than the level it should have reached if it had continued to grow at the rate before. pandemic. The loss of productivity is observed in all sectors, including in industry: the hourly productivity of industrial employees fell by 7.9% between the end of 2019 and the first quarter of 2023, with a marked drop in the transport equipment (-19%) and agri-food (-8%) sectors.

As for the causes, specialists from the Banque de France emphasize “the increase in absenteeism” in 2023, as well as the “increase in vacant jobs” attributable to the tensions observed in the labor market since three years. Next comes learning, which has seen unprecedented momentum since the end of the health crisis. Work-study represented a third of the net creation of salaried jobs from the end of 2018 to the end of 2022. However, these apprentices, considered as full-time workers by employment statisticians, are less productive than employees experienced.

Labor retention, a consequence of employers’ anticipation of recruitment difficulties, also plays a role in the drop in productivity. “The business aid put in place since the crisis has been able to encourage retention, by reducing the incentives to adjust the workforce by dismissal/hiring,” note the analysts. We must also take into account the “recomposition effects”, that is to say the recent entry into the labor market of people permanently excluded from employment or less qualified, favored by the “Macron orders” and the reforms. unemployment insurance.

Despite this bleak diagnosis, the Banque de France wants to be relatively optimistic. According to its analysts, the main factors identified (increase in apprenticeship, composition effect, labor retention) reflect the “dynamism of French employment” more than a “decline in the potential for wealth creation ". The central bank's chief economist, Olivier Garnier, also maintains that labor retention, which has affected productivity since the end of Covid, is only transitory. “The overstaffing linked to labor retention is in the process of being absorbed,” he assures in Les Échos. And to affirm that French productivity should thus return to its pre-crisis levels in the coming years. “In our projections, between 2024 and 2026, productivity should temporarily return to gains higher than the 0.7% per year it experienced before the epidemic. In three years, almost a third of the lost productivity should thus be made up for.

The reassuring message from the institution should relieve the executive, which continues to defend the hypothesis of a temporary air gap. In its macroeconomic projections, the government expects average productivity gains of around 0.5% per year from 2024 to 2027. Economists, however, remain worried. “With such modest progress, we are not even making up for the past dropout,” warned Mathieu Plane at the beginning of the month. Especially since the European Commission's forecasts are less optimistic than those of Bercy. Brussels economists anticipate growth in productivity gains contained around 0.1% until the end of the five-year term.

This gap, which seems minor, is not anecdotal. The evolution of production factors and their overall productivity enter into the calculation of potential growth, modeling of the economy at cruising speed. Potential growth is in turn taken into account in the estimation of the structural deficit, i.e. the level of public deficit which would be reached if growth were established at its potential. If the first falters, the second increases. So, if French productivity does not quickly recover, the entire house of cards of public finances threatens to wobble...