“Workers in Germany and France are falling further behind their American counterparts in productivity,” writes Christopher Rhoads in today’s Wall Street Journal.

“If the trend continues, it could have severe consequences for Europe’s future standard of living and economic competitiveness, says a study by consulting firm McKinsey & Co.’s economic think tank, the McKinsey Global Institute. The economies of Germany and France account for more than half of the euro zone’s economic output.”

“After several decades of closing the gap on the U.S., labor productivity — a measure of output achieved per hour of work and a key determinant of economic growth — fell further behind in Germany and France during the past seven or eight years, according to the report, which is due to be released Wednesday.”

“The development threatens to sap Europe’s prosperity in the coming years. Since the size of Europe’s working-age population is shrinking, due to declining birth rates and more retired workers, an increase in labor productivity is required simply to maintain the current standard of living.”

“Instead, just the opposite is happening, according to the report, which took nine months to compile and examines conditions in six industries in Germany and France. ‘The current situation should be of major concern’ for Europe, the report said. ‘The growing prosperity and improved living standards seen in France and Germany over the past 50 years have been largely dependent on the continued improvement in productivity.’”

“Gains in labor productivity are important because they allow firms to produce more for a given amount of labor, an advantage they can then use to lower prices to increase market share, increase wages to attract higher-skilled workers, or expand investment. All of which can boost consumption, exports and eventually employment — and contribute to ratcheting up the rate of growth of the economy as a whole.”

“A common explanation for the widening productivity gap between the U.S. and Europe in recent years is the big surge in information-technology spending in the U.S. Manufacturing of information technology in the past five years of the 1990s amounted to 2.3% of gross domestic product in the U.S., compared with 1.5% in Germany and 1.3% in France during that time, according to the report.”