Report
Patrick Artus

What possible scenarios if the health measures reduce labour productivity?

The health measures linked to the coronavirus crisis (social distancing in companies) will reduce labour productivity, perhaps for a long time. What could be the consequences of a shock leading to a fall in hourly labour productivity? We can first imagine a scenario of a decline in the supply of goods and services with either a fall in nominal per capita wages, or a fall in earnings, or rather a rise in prices. The private sector’s real income falls in all cases, which leads to a fall in demand for goods and services that balances out the fall in supply caused by the decline in productivity; To prevent a fall in the supply of goods and services, there must be an increase in employment going hand-in-hand with a fall in the per capita wage, or an increase in the working time per employee going hand-in-hand with a fall in the hourly wage. Demand is then also stabilised, thanks either to an increase in employment or to a stable per capita wage; Lastly, we can expect additional productivity investment (automation, etc.) in the medium term to offset the fall in hourly labour productivity.
Provider
Natixis
Natixis

Based across the world’s leading financial centers, Natixis CIB Research offers an integrated view of the markets. The team provides support to inform Natixis clients’ investment and hedging decisions across all asset classes.

 

Analysts
Patrick Artus

ResearchPool Subscriptions

Get the most out of your insights

Get in touch