The productivity of an economy, a sector or a company is the best indicator of its competitiveness and its capacity to grow its activity in the long term. One would have thought that with the massification of higher education, the globalization of capital markets and the rapid diffusion of technologies via the Internet, productivity would converge. It is not so. This presents very strong differences. In the simplest approach, we measure the apparent productivity of labor, obtained as the ratio between value added and the quantity of labor used to generate it, and the apparent productivity of capital, the ratio between value added and the quantity of capital tied up to produce it.
The drop in wealth produced between Europe and the United States is mainly due to a drop in productivity per hour worked. The subject being strategic, the Council of the European Union recommended in 2016 the creation of national productivity councils in each member state of the euro zone. The French Productivity Council, chaired by Natacha Valla, submits a report each year on its evolution.
Among developed countries, France stands out for a decline in labor productivity. Since 2019, this has fallen by 8.5% compared to its pre-Covid trend. Job creation, linked to the massive development of apprenticeships and the retention of labor in certain sectors, was in fact more dynamic than GDP. In addition, less qualified employment has grown faster than qualified employment.
Fall in capital productivity in France
But few people study the question of capital productivity. However, this is in free fall in France according to OECD statistics. Over the last decade, it is -1.4% per year, the second worst performance after Austria (-1.6%). However, capital investment has been well oriented in France since 2000 (+ 2.9% per year), and much higher than in Germany (+ 1.7%). This means that our companies invest without reaping the benefits, a situation worse than not investing.
Capital investment can be divided into four categories: buildings, machines, software and R&D. In the 1990s, 25% of the increase in capital in France was due to investments in software and databases. data, then 29% in the 2000s, 43% in the 2010s and 61% since 2020. We see the tremendous rise in power of software, echoing Marc Andreessen’s famous phrase “Software eats the world”, of 2011. For comparison, in Germany, software only accounts for 14% of the capital increase since 2020.
This discrepancy is actually explained by poor accounting of the software by us. The transition to SaaS, software as a service, means that you no longer purchase the software but a user license. In other words, it is not an investment but a charge, also called intermediate consumption. However, our companies are increasingly consuming SaaS, for their office software, their customer management tool (CRM), their resource planning tool (ERP), their reservation platforms, etc. A recent statistical revision has caused a drop investment in software and databases – the formation of fixed capital, in economist jargon – from 82 to 62 billion euros per year. Based on this new calculation, French capital productivity would therefore be a little less dramatic than announced.
But this drop in productivity is also due to a poor conjunction between work and capital. We buy machines or software, but due to a less qualified workforce and less organizational flexibility, we use them less efficiently than our neighbors. Equipping yourself with automated invoice recognition software but keeping the same teams destroys productivity. Finally, let’s not forget that France’s dependence on SaaS software poses another problem: that of loss of value. This software is mainly sold by foreign companies which locate their revenues outside France. The largest German software publisher, SAP, generates nearly 5 billion in revenue in Germany. Dassault only makes 500 million in France.
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