“Productivity isn't everything, but in the long run, it's almost everything. A country's ability to improve its living standards over time depends virtually entirely on its ability to improve productivity per worker”.

The citation of the Nobel Prize in Economics, Paul Krugman, set the tone for the Public Administration Competence Center (PlanApp) to analyse the productivity of companies in Portugal. A document that highlights the impact of zombie companies in raising finance for more productive competitors, and which also highlights the added value of companies with more complex tasks.

Before that, the report condemns the “near stagnation dynamics” observed between 2010 and 2019 in productivity in Portugal, which only accelerated the slowdown trend observed since 1970. In the second decade of this century, the average annual growth rate of productivity per worker was only 0.6%. At the same level as Spain and Germany, but below countries such as Estonia, Lithuania and Latvia.

In 2019, the year before the pandemic, labour productivity in Portugal "corresponded to only 49% and 56% of that recorded in France and Germany", signals the document. However, the Baltic countries “registered substantially higher productivity growth rates” and “are now very close to the labour productivity” registered in Portugal.

What causes the slowdown?

After presenting the numbers, the PlanApp planning center describes the problems that exist in terms of the economic context and in the internal life of companies that justify the smaller increase in productivity in Portugal.

With regard to the economic context, he draws attention to the “exit barriers” that “favour the survival of zombie companies that absorb resources”. The document identifies that in non-tradable sectors, such as services and construction, a greater presence of zombie companies “limits investment and employment, increases the productivity gap between companies” and increases “the productivity requirement for newly created companies”.

The report notes, on the other hand, that companies that consider the context costs associated with the labour market as being relevant to their activity have, on average, lower levels of labour productivity.

Workers' qualifications also contribute positively to increased productivity. The same happens with the qualifications of managers: “the most productive companies have, on average, more management positions and more qualified managers than other companies”.