New York, NY, March 8--Companies in America’s fast-growing retail and wholesale trade sector have been the major drivers of U.S. productivity growth since 1995, and the transformation of U.S. retailing is a major reason the U.S. maintains a substantial productivity lead over Europe.
A comprehensive study by The Conference Board, released today, shows that more than 50% of America’s productivity growth lead over Europe is due to gains in retail and wholesale trade.
The transformation of U.S. retailing from a low-tech industry to a sophisticated high-technology market force has been a major factor in the acceleration of U.S. productivity growth. Retail and wholesale trade firms have reaped significant productivity gains by relying on scale and scope, with massive centralized chains and increasingly large stores growing rapidly. New information and communication technologies and the organizational changes they support have produced new and better information about customers, faster, cheaper, and timelier information flows to and from business units, and smaller inventories.
But despite its slower start, Europe has enormous potential to reduce the productivity gap in these sectors. Many European firms are applying the new technologies efficiently, operational regulations are easing within many countries, and competitive incentives for change are increasing as obstacles to cross-border operations diminish.
The Conference Board study reveals that labor productivity growth among U.S. retail firms jumped to 7.4% between 1995 and 2002, up from 2.6% between 1980 and 1995. Wholesale trade firms showed productivity growth of 8.5% since 1995, compared with 4.1% from 1995 to 2002.
European productivity growth stalled in these sectors, with firms in Belgium, France, Germany, Italy and Spain posting extremely slow gains as productivity growth decelerated in both retail and wholesale trade in each of these countries in the 1995-2002 period.
Only in Spain did productivity growth improve, from -0.5% in 1990-95 to 0.5% between 1995 and 2002. The Conference Board study shows that among these countries productivity growth in retail trade ranged from 0.2% in Belgium to 1.6% in France, compared to 7.4% in the U.S. between 1995 and 2002.
The figures for wholesale trade show slightly bigger gaps, with the U.S. recording an 8.5% growth rate compared to Germany and Belgium showing 1.6% and Italy showing -0.1% growth. But as this new study argues, some of Europe’s slow productivity growth of the late 1990s may be due to the much-needed adjustments still underway.
