Aspirations exceed economic capacity - not hours worked, but what is done in every hour worked

By TPN/Lusa, in Business · 29-11-2018 10:32:00 · 1 Comments
Aspirations exceed economic capacity - not hours worked, but what is done in every hour worked

The governor of the Bank of Portugal has said that Portuguese welfare and equity aspirations exceed the economy’s production capacity, arguing that only additional growth can prevent living with “limited aspirations.”

“It is clear to everyone that the aspirations of individual well-being and collective equity of Portuguese society nowadays exceed the production capacity of the economy. We have aspirations for which we have no available production capacity and such misalignment can only be made up with more and better economic growth, otherwise we will always live with aspirations that are limited by our own inability to generate the income that allows them to be met,” said Carlos Costa.
According to Costa, it is now clear that what separates the Portuguese economy from the frontrunners of advanced economies is the productivity of each hour worked and not the number of hours each person works in Portugal, as well as the qualification of human resources, including the qualification of managers.
Costa, who was speaking at the celebratory dinner for the 30th anniversary of Porto Business School, in Porto, said studies show that about 30 percent of the differences of companies in different countries are explained by variations in quality, robustness and efficiency of management models.
Although the number of human resources with higher skills has increased, according to the governor of the Bank of Portugal, “there are still significant gaps in relation to European averages and it is therefore necessary to continue to improve the formal education of workers, particularly older people who typically have fewer qualifications.”

“If this does not happen, we will have a progressive disqualification of this type of worker, to their own detriment and to the detriment of the economy as a whole, and of course, of the social state that has to include them under penalty of creating a less cohesive society,” he explained.
Even so, the promotion of the qualification of human resources cannot be reduced to increasing the number of years of schooling of the population, because, he argued, “if the accumulated skills do not fit market demand, this will lead to social discontent, waste of resources and damage to public finances.”
“What we are generating, fundamentally, is a situation of dissatisfaction that will lead to pressure on the budget, or on society and, of course, an exit of workers to other economies,” he added.
According to Costa, the problem of the Portuguese economy “is that it is based on two legs, one that is tradable, and another that is not tradable,” and the non-tradable one tends to become longer, he said.
The focus on the tradable sector is, therefore, he noted, an essential condition for the sustained growth of Portugal’s economic activity and a condition to ensure development with continued economic growth, as well as job creation.
The governor of the Bank of Portugal also explained that the great difference between the adjustment model that Portugal adopted, for example, in relation to Greece, is the result of the behaviour of exports, which avoided “a more painful adjustment” and “slower growth.”


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