Study
A new study by the European Employers’ Institute (EEI), led by the research institute Rexecode, highlights why Europe continues to lag behind the United States in labour productivity.
The report “Understanding the EU–US Labour Productivity Gap: #1 – The Broad Perspective” finds that hourly labour productivity in the EU has grown by just 1% per year over the past 25 years, compared to 1.8% in the US. This divergence has left EU productivity around 20% below US levels in 2024.
The study identifies 11 key factors behind Europe’s productivity slowdown, including:
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lower investment in information and communication technologies (ICT)
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fragmentation of the internal market
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weaker business dynamism and smaller firm size distribution
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skills mismatches
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persistent administrative and regulatory burdens.
The gap has been particularly pronounced in ICT and business services, sectors where US firms have reaped major gains from digitalisation. Since 2019, the divergence has widened further, with EU productivity growth slowing to just 0.6% per year, compared to 1.9% in the US.
The findings echo recent warnings from the Draghi and Letta reports on Europe’s competitiveness. As Delphine Rudelli, Chair of the EEI Board, stressed:
“Europe’s productivity gap with the US goes beyond just technological lag or investment shortfalls – it’s also fuelled by the ever-present regulatory burden. This study arrives at the best time, when the EU needs to address its competitiveness and productivity issues.”
This is the first in a three-part series of EEI studies comparing EU and US productivity. For employers and policymakers alike, the results underline the urgent need to boost investment in digital technologies, reduce red tape, and support skills development to strengthen Europe’s long-term growth and competitiveness.
