Spain is less productive than it was at the beginning of the century, so it has less capacity to grow and generate wealth. The aggregate decline is 7.3% less. In these 24 years, the economy - measured in terms of GDP (gross domestic product) - has grown but not the efficiency with which companies use labor and available capital (productivity), according to data from the Productivity and Competitiveness Observatory created by the BBVA Foundation and the Ivie.
The decline registered in Spain contrasts with the increase that occurred in other advanced economies such as the United States (advance of 15.5%) or Germany (11.8%). The report warns that “the lack of progress in productivity slows the growth of GDP per inhabitant and widens the gap” with the European Union. While in 2000, the distance between Spain and the EU was 2.4%, in 2022 that gap had shot up to 14.4%.
The indicator used is the sum of labor productivity and capital productivity. While that of labor has grown, that of capital has fallen, which has caused the aforementioned general drop in total productivity by 7.3%. Why does the productivity of capital and investments fall? “Because it has been invested in real estate assets that have provided returns in the short term but not in the long term,” responds Matilde Mas, an Ivie researcher and one of those responsible for the report. The work specifies that “the low productivity of capital reflects an excessive accumulation of real estate assets during the boom, which continue to be partially used by the companies that own them and hinder productivity.” During the first years of the century, with the construction boom, there were many companies in sectors such as hospitality, energy or services that invested large amounts of resources in building warehouses, commercial premises, offices or homes that “turned out to be unproductive.”
Mas explained that quick profits were sought with the sale of the building and not so much with what those assets could generate in the future. In fact, the report warns that “real estate assets are very durable and can remain partially unused for decades, entailing amortization and financial costs for the companies or households that own them.”
All of this ends up harming the economy in an aggregate manner. “Spain's disadvantage in productivity compared to other countries limits its international competitiveness because part of its productive system is not efficient, slowing down cost advantages when competing and improvements in per capita income and well-being,” the report states. report from the BBVA and Ivie Foundation.
Although in the aggregate period of recent years there has been a drop, if the recovery period prior to the pandemic is analyzed between 2013 and 2019, there was a productivity growth of 1.2%. The report details that this improvement in productivity that is truncated by the pandemic is supported in part by a “change in the orientation of investments towards more knowledge-based assets such as machinery or information and communication technologies ( TIC)".
Regarding work productivity, Mas explained that the most negative elements are temporary employment, long-term unemployment and the mismatch between labor supply and demand. The researcher considers that this instability prevents productivity from advancing as it does in other areas.
The other major European country with a drop in productivity is Italy with a decrease of 5.1% so far this century. The report warns that Italy and Spain are precisely “the only countries in the euro zone that have not yet created a National Productivity Council, as the EU recommended in 2016.”
