Four evidences and a question

High growth rates of GDP and employment do not necessarily imply an improvement in people's prosperity. GDP per capita is a more appropriate indicator to assess the translation of growth into well-being – and even better, disposable income per capita. In turn, the main determinant of GDP per capita is productivity; that is, GDP generated per job or per hour worked. From this point of view, it is concerning that since the beginning of the previous decade, the productivity of the Catalan economy has tended to perform worse than the European one – with the exception of the incipient recovery in recent years. To what extent can this loss of productivity in relation to Europe be explained by the bias of the Catalan economy towards certain activities considered of low added value?

There are two complementary ways to answer this question. The first is to compare productivity between Catalonia and Europe sector by sector. The second is to consider changes in the productive structure; that is, to what extent less/more productive sectors gain/lose weight in the total. Using the information provided by Eurostat for ten major sectors of activity and calculating productivity in terms of added value in current euros per hour worked, we find that both in Catalonia and in the EU-27 there are four sectors with above-average productivity (industry, information and communications, financial and real estate), and the latter two are special cases. The rest are below.

First evidence: comparing sector by sector with data from 2024, the primary, industrial, financial, and aggregate sectors, which include trade, transport, and hospitality (where the core of tourist activities is located), registered productivity levels in Catalonia higher than the European average. The rest (six sectors) contribute negatively to the productivity differential with the EU-27. Second evidence: between 2000 and 2024, the industrial sector; the financial sector; the aggregate of trade, transport, and hospitality; professional and business support services, and other personal services have shown productivity growth rates in Catalonia higher than the European average for the same sectors. Third evidence: the sectors with below-average productivity that have most increased their share in total employment in Catalonia between 2000 and 2024 are professional and business support services (7.2 points), and public, educational, healthcare, and social services (6.8). The increase in the relative weight of activities most closely linked to tourism (trade, transport, and hospitality) has been more moderate: 1.6 points over the total – and 0.9 points more than the European average, where an increase in the weight of this sector is also observed. Fourth evidence: both in the EU-27 and in Catalonia, the set of activities with below-average productivity has gained weight in total employment, reaching a similar weight in both areas in 2024: 77.1% and 79.0%, respectively. In part, because the activities in which productivity has grown the most are also those that have generated the least employment (or those that have destroyed the most).

In conclusion: it does not seem that the issue of Catalonia's relative loss of productivity with Europe – and, by extension, of a Catalan growth pattern essentially different from the European one – can be simplified by pointing to any particular sector. If we had the power to reduce the volume of employment in certain activities considered low-productivity, without making other changes, to what extent would it have served to accelerate the growth of aggregate productivity of the entire economy? Or would we rather find ourselves with a growth pattern not very different from the current one, but with a smaller economy? Certainly, one way to increase the level of productivity – not necessarily the growth rate of this variable – is to apply discretionary measures that slow down or destroy activity and employment, eliminating the least productive companies and activities. Another way is to remove barriers and apply incentives that favor investment in training, capital, and technology in all branches of activity. These are not necessarily incompatible paths, but the second has a lower social cost and is the only one that would allow us to converge sustainably with the most advanced economies in Europe.

To advance in this direction there are no simple solutions or shortcuts. More and better training, more innovation, more and better infrastructure, a in-depth reform of administrations, impetus to strategic sectors that are more intensive in knowledge and technology, and public policies that facilitate all companies to grow in size and create more productive and better-paid jobs are needed. Finally, these objectives can only be achieved if the government of Catalonia has the necessary resources and competencies, as a result of a new financing model that substantially improves the current one.