Final answer:
The OECD tracks labour costs and productivity, such as real GDP per hour worked, which are key to assessing economic competitiveness. By analyzing growth rates, we can understand changes in labour productivity like in the case of Canada and the UK, where despite a higher starting point, Canada's lower growth rate results in its lead narrowing over time. Different factors such as investment, technology, and education contribute to these productivity differences.
Step-by-step explanation:
International Comparison of Labour Costs and Productivity
The comparison of labour costs and productivity across different countries is a vital aspect of understanding economic competitiveness. The Organization for Economic Co-operation and Development (OECD) provides key metrics for this comparison by tracking the annual growth rate of real GDP per hour worked. By analyzing this data, we can evaluate a country’s performance relative to others in the OECD, and understand Canada’s changing position over time.
To illustrate, let's consider a scenario where the average worker in Canada has a productivity level of $30 per hour and in the United Kingdom, it is $25 per hour. If productivity in Canada grows at 1% per year and in the UK at 3% per year over five years, the UK's productivity would eventually surpass Canada's. Initially, Canada has a $5 lead, but after five years, the productivity levels would be approximately $31.5 for Canada and $29 for the UK. Hence, Canada would still have higher productivity, but only by $2.5, significantly less than the initial lead.
Factors contributing to differences in labour productivity include levels of capital investment, technological advancements, education, and training of the workforce, and various other socioeconomic factors. Visiting databases such as the OECD and the St. Louis Federal Reserve allows for a detailed comparison of these statistics and understanding the underlying reasons for productivity differences between countries.
When evaluating the relative productivity between the U.S. and Mexico, with the U.S. starting at eight times the productivity and growing at 2% per year, and Mexico at 6% per year over 25 years, Mexico may eventually catch up or even surpass the U.S. due to the compound effect of a higher growth rate, despite a lower starting point.