Spain's productivity problem: an insightful interview with the Economy Minister's advisor
Spain's INE statistics office revised productivity growth down to 0.5% a year. Its advisory council says a 10% gain per worker would give the state an extra €60 billion.
English · Original discussion in Spanish · Published
The INE's revision leaves productivity growth at half what the Ministry of Economy had claimed. The ministry's advisory council calculates that a 10% increase per worker would add €60 billion to the state, enough to cover the deficit of the public pension system.
Spain's productivity is not growing the way the government says. Economy Minister **Carlos Cuerpo** was boasting of a **1% annual** improvement. After the **INE**'s revision, the figure is half that. The structural foundation of current growth is weak, and that is not bar-talk opinion: it is what the revised data themselves show.
## A 10% gain per worker would be worth €60 billion
The chairman of the Economy Ministry's Productivity Advisory Council makes it clear in an interview with **El Mundo**: if productivity per worker were **10%** higher, at the current tax burden the state would have an additional **€60 billion**. That money would cover the deficit of the public pension system. It is the most direct way to explain why productivity is not an abstract textbook concept: it is the difference between a system that holds up and one that falls apart.
The current pace is exasperating. At this rate, Spain would need **40 years** to reach the nominal European average income per capita. Four decades. An entire generation to converge with its neighbours.
## EU funds have not moved the needle
The European Union's Next Generation funds have not served to change the Spanish economy's low productivity. The advisor himself admits this and calls for a study to find out why. Business investment remains the weak point, along with worker training. These are the two factors that explain why productivity is not taking off.
There is a backstory that goes back a long way. Since **2012**, after the collapse of residential construction as an economic engine, Spain has bet almost everything on foreign tourism. Growth did come, but with low productivity. Serving a tourist requires a lot of labour for a service of little economic value. Building a commercial aircraft involves thousands of workers but generates far higher value per worker.
## The low value-added model
Spain's productive model has specialised in low and medium value-added services. That has knock-on consequences. The household savings rate is not channelled into companies: instead of investing in shares or bonds of domestic firms, savings go into property. And the de facto migration policy does not attract engineers from the English-speaking world or northern Europe, but migrants from Latin America and Africa with little training. A plan without cracks.
The problem is fundamental. Spain wants a Nordic welfare state without Nordic per capita incomes. It wants to be something it is not. The high fiscal burden is a wall blocking growth to higher levels. Without raising productivity — producing more value with fewer workers — convergence with the European average income is impossible.
Spain's productivity is not growing the way the government says. Economy Minister **Carlos Cuerpo** was boasting of a **1% annual** improvement. After the **INE**'s revision, the figure is half that. The structural foundation of current growth is weak, and that is not bar-talk opinion: it is what the revised data themselves show.
## A 10% gain per worker would be worth €60 billion
The chairman of the Economy Ministry's Productivity Advisory Council makes it clear in an interview with **El Mundo**: if productivity per worker were **10%** higher, at the current tax burden the state would have an additional **€60 billion**. That money would cover the deficit of the public pension system. It is the most direct way to explain why productivity is not an abstract textbook concept: it is the difference between a system that holds up and one that falls apart.
The current pace is exasperating. At this rate, Spain would need **40 years** to reach the nominal European average income per capita. Four decades. An entire generation to converge with its neighbours.
## EU funds have not moved the needle
The European Union's Next Generation funds have not served to change the Spanish economy's low productivity. The advisor himself admits this and calls for a study to find out why. Business investment remains the weak point, along with worker training. These are the two factors that explain why productivity is not taking off.
There is a backstory that goes back a long way. Since **2012**, after the collapse of residential construction as an economic engine, Spain has bet almost everything on foreign tourism. Growth did come, but with low productivity. Serving a tourist requires a lot of labour for a service of little economic value. Building a commercial aircraft involves thousands of workers but generates far higher value per worker.
## The low value-added model
Spain's productive model has specialised in low and medium value-added services. That has knock-on consequences. The household savings rate is not channelled into companies: instead of investing in shares or bonds of domestic firms, savings go into property. And the de facto migration policy does not attract engineers from the English-speaking world or northern Europe, but migrants from Latin America and Africa with little training. A plan without cracks.
The problem is fundamental. Spain wants a Nordic welfare state without Nordic per capita incomes. It wants to be something it is not. The high fiscal burden is a wall blocking growth to higher levels. Without raising productivity — producing more value with fewer workers — convergence with the European average income is impossible.
Summary of a discussion on Burbuja.info - Foro de economía, actualidad y política., translated from Spanish and reviewed before publication. Read the full discussion (8 replies).
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