The National Productivity Council (Conseil national sur la productivité) has unveiled its 2023-2024 report. It notes a slight fall in productivity in Luxembourg between 2022 and 2023 (2.57%) and proposes areas for improvement.
For more than a decade, labour productivity in Luxembourg has shown almost zero growth. In 2023, GDP per hour worked was $128.80 in purchasing power parity (PPP) terms, higher than in Belgium ($112.90), Germany ($95) and France ($92.80). However, whilst Luxembourg remains one of the most productive countries in Europe (1.5 times more productive per hour worked than the eurozone average), its comparative advantage is gradually diminishing.
Real labour productivity per hour worked has stagnated in Luxembourg since 2010, with negative average annual growth of 0.2%. By way of comparison, over the same period, it increased in France (+0.7% per annum), Germany (+0.9%) and Belgium (+0.5%). This trend became more pronounced between 2021 and 2023, when Luxembourg’s productivity fell by more than 3%, dropping back below its 2019 level.
Evolution of labour productivity, GDP per hour worked according to the OECD. Graph: CNP
This stagnation can be explained by several structural factors. First, the average working time per employee is falling, due to an increase in part-time work, (4.5% of hours worked in 2023) and the extension of statutory holidays. Second, the weight of services in the Luxembourg economy, particularly finance, limits productivity gains compared with more industrialised sectors. Finally, the energy transition and administrative complexity are holding back business investment in innovation and process optimisation.
The issue of adds further pressure: with a system that is largely dependent on economic growth, stagnating productivity could ultimately undermine Luxembourg’s social model.
Trends in real labour productivity in Luxembourg, per hour worked and per person employed, according to Statec. Graph: CNP
Five ways to boost productivity
Simplify the administrative environment: The regulatory framework and administrative procedures are regularly singled out by businesses as obstacles to efficiency. The introduction of — which would allow companies to avoid having to provide the same information to the authorities several times–could free up precious resources.
Invest massively in innovation and training: Luxembourg needs to make itself more attractive to talent and investment in research and development. At present, private R&D spending remains well below the European average. Adopting a “fast follower” approach by rapidly integrating innovations developed elsewhere could also accelerate productivity gains.
Accelerating the adoption of artificial intelligence (AI): AI represents a major lever for productivity. Although Luxembourg is well positioned in terms of technological readiness, the use of AI . A national strategic plan could facilitate its adoption and maximise its economic benefits.
Encouraging business growth: Luxembourg has a high density of startups, but they are struggling to grow. Encouraging scaleup through better access to finance and international markets would boost the country’s overall productivity.
Improving management practices: The country suffers from a shortage of management skills compared with other advanced economies. Better training for managers and the promotion of in business and public administration could improve organisational efficiency and employee motivation.
This article was originally published in .