Because Italian productivity is more solid than we think

Our country is among the first in the world for GDP and industrial added value per employee

It is now a rather widespread habit to explain periods or problems of weak economic growth of an economy or a company by resorting invariably, if not exclusively, to the "barometer" of productivity, considered almost infallible. Is a country growing little? The answer comes almostdefault: It is due to low productivity. Ditto for a company. This greatly simplifies reality.

The measures of productivity, as is known, are different: firstly,labour productivity(per employed or per hour worked),then that of capitaland finally the so-calledtotal factor productivity (PTF), which measures the share of production that cannot be explained otherwise, that is, through the combination of the first two "classical" factors (labor and capital). The PTF aspires to measure efficiency improvements due to technical progress and organizational innovation of economic systems. Precisely because it should "capture" the impact of unknown and only presumed phenomena, the PTF should be used with caution but this usually does not happen and excessive significance is often attributed to it.

Undoubtedly, all the productivity indicators mentioned can be useful but they are often also deceptive or misleading, if handled poorly. They should be used with extreme caution and, preferably, only to make comparisons over long periods. Furthermore, there is often confusion between the level of productivity and its dynamics. These are two different indicators, which provide different information. It may happen that the level of productivity is high, indicating efficiency, but that the dynamics of productivity is stationary, i.e. that it has no longer grown significantly for some time. Or the opposite may happen, i.e. that productivity grows but that the company or economic system examined is still very far from levels of productivity that can be considered satisfactory. Both situations must be adequately placed in context to avoid reaching fallacious conclusions.

In Italy, as we will see in this article, the weak growth of our economy and industrial production in the first fifteen years of this century is often associated with ahypothesis of low general productivity.This has solidified over time the cliché according to which productivity is modest in Italy. Furthermore, productivity is almost always spoken of in aggregate terms and almost always with a negative tone, ignoring many numbers of excellent Italian sectoral examples with high productivity, as in the case of the labor productivity of our medium and medium-large manufacturing companies, by far the most "productive" in Europe, capable of surpassing the corresponding German companies. Hardly anyone knows, finally, butItaly also has the third highest GDP per employee at purchasing power parity in the G-20, after the United States and Saudi Arabia.

How productivity indices can provide misleading indications

In debates on the performance of economies or businesses, productivity almost always has the last word and if productivity is low or grows little the sentence is inevitably condemnatory and unappealable.But a drop in productivity should not always necessarily be judged as a negative phenomenon.To give a trivial example, if an entrepreneur intentionally keeps jobs in place during a period of temporary decline in activity, even a relatively long one (for example, a year or a year and a half), not wanting to give up his skilled or non-easily replaceable workforce, productivity drops, yes, but this is a meritorious fact and not necessarily an indicator of poor company efficiency. Indeed, it can even be a symptom of particular financial resilience, if the company can afford to make such a choice not only due to the good heart of the entrepreneur towards his employees and workers but above all thanks to its financial solidity and its strength on the market.

In the United States and other advanced countries, frequently, at the slightest sign of a negative economic trend, employees are quickly fired and escorted out of the company with boxes in hand, Lehman Brothers style. A cut in employment is often even rewarded on the stock market, as it reduces costs and, at least in the short term, can improve profits and dividends for shareholders. In Italy, it is difficult for all this to happen in our industrial districts and in Made in Italy family businesses. Furthermore, tools such as the Redundancy Fund make it possible to overcome temporary difficult moments or to manage crisis situations over a long and less traumatic time.

It should also be noted that measuring productivity over short periods, that is, for example, from one year to the next, is misleading, as productivity is essentially a long-term indicator. Sensationalist headlines like “Productivity Collapsed in 2025” make no sense and only confuse ideas, because temporary drops in productivity can occur during short recessions unaccompanied by layoffs, just as in the cases cited above. But also in long-term analysescaution is needed in making summary judgments on productivity,because not infrequently the dynamics of the productivity of an economy is calculated by taking into consideration rather questionable reference intervals and proposing completely unrealistic numbers as absolute truths, on the basis of these assumptions.

In the last two years, labor productivity in Italian industry has slowed down but its recent growth remains the strongest in Europe

In recent decades there has been no worse moment for Italian industry than that between 2009 and 2014, with a deep recession and a collapse in added value and employment. But the most recent Istat tables(“Productivity measures. Years 1995-2024”, 12 December 2025) chose that anomalous period as one of the reference intervals in the history of our industry to measure its productivity. In particular, Istat data indicate for the period 2009-2014 a record average annual growth in industrial productivity per hour worked of 2.8%!An absolutely misleading number.In fact, it should be remembered that 2009 was a "minimum" year in the global and Italian economic cycle, in the midst of the financial storm of subprime mortgages. It would therefore have been much more reasonable to adopt the period 2008-2014 as a reference interval, i.e. to compare 2014 with 2008, the pre-crisis "maximum" year. In this case, the productivity per hour worked of the Italian industry would have recorded a more modest annual growth of +1.1%.

However, even this last figure of productivity per hour worked 2008-2014 is in reality very little representative of the true state of health of our industry in that period. In fact, between 2008 and 2014, the added value of Italian industry decreased overall in real terms by 14.7% and its employees decreased by as many as 674 thousand units!It was a real disaster.Having had a strong growth in productivity per hour worked in this period may perhaps excite on a historical level the most avid worshipers of statistical productivity indices, but at that time it was certainly not sufficient consolation for Made in Italy, exhausted by the crisis.

On the contrary, in the period of success and strong recovery of our industry from 2014 to 2022, in which even the drama of Covid was overcome with momentum, Italian industrial added value grew overall by 10.2% and employed people, despite the shock of the pandemic, increased by 93 thousand units. But productivity per hour worked recorded an average annual increase of only 0.7% in this period, lower than that of the dark period 2008-2014 (+1.1%, we remind you again) or that of 2009-2014 chosen by Istat (+2.8%). Productivity per hour worked is therefore revealed, in this case,an absolutely misleading figureof the real conditions of the economy in the two periods analyzed. And this case demonstrates that the theorem "the more productivity grows, the better things get" is not always true, especially if productivity measures are not adequate.

If instead of productivity per hour worked we use productivity per employee, in our opinion a more significant indicator (especially in the case of a country like ours where hours worked can be influenced by instruments such as the Redundancy Fund), the productivity numbers relating to the years mentioned above change completely and are as follows. In the period 2008-2014, the added value per employee of Italian industry decreased in real terms by an average of 0.1% per year, while it grew by an average of 0.8% per year from 2014 to 2022. In this second period, our productivity increased more than that of German industry (+0.7% on average per year), while it decreased in Spain (-0.1%) and France (-1%). Figures that give a more realistic picture of the recent progress in competitiveness and efficiency of Italian industry after the difficulties of the first fifteen years of the century.

As is known, in the last two years the industrial situation in Europe has worsened dramatically. However, even if we consider the entire last decade 2014-2024 (including the two negative years 2023 and 2024), productivity per employee in Italian industry records an average annual growth of 0.4%, always higher than that of Germany (+0.1%), with declines instead in France (-0.1%) and Spain (-0.6%), as shown in the graph.

The labor productivity of Italian manufacturing companies that actually compete on world markets (those with 20 employees and above) is higher than in Germany, France and Spain

Measuring the level of productivity of the Italian manufacturing industry as a whole risks being extremely misleading because in our country there are, based on 2023 Eurostat data, as many as 284 thousand companies with 0-9 employees and another 37,400 companies with 10-19 employees: an absolute record in Europe. These micro-enterprises, often made up of just a husband and wife, with sometimes some other relatives or, in any case, if larger, with very few employees, are a social phenomenon (frequently former workers who have preferred to become very small entrepreneurs rather than simply taking a salary) and play a fundamental ancillary role by working for larger companies (they rarely export directly). However, they have a relatively low labor productivity, measured by the value added per employee, as one would logically expect, which reduces the average productivity of Italian manufacturing, generating a gigantic statistical distortion. Therefore, the labor productivity of our manufacturing as a whole is 81,870 euros per employee in 2023, higher than that of Spain (71,190 euros) but lower than that of France (89,240 euros) and, above all, Germany (94,840 euros). Numbers that have led many to state that the Italian industry is not competitive!

Nothing could be more wrong. On the other hand, how do you explain that in the first seven months of 2025 Italy surpassed even Japan in exports, becoming the fourth largest exporter of goods in the world after China, the USA and Germany? If we really had low productivity and low competitiveness we certainly wouldn't have succeeded. In fact, the truth is different. We must be aware that it is not the micro-enterprises that really compete on international markets and make Made in Italy great in the world, but rather the larger companies, those with at least 20 employees or more. And so, if we exclude micro-enterprises, we discover a disruptive surprise, which sweeps away in one fell swoop all the absurdities that have been said for years about the low productivity and presumed weak competitiveness of our manufacturing companies. In fact, according to new Eurostat data released recently, in 2023 Italy will outperform Germany - considered the productivity benchmark par excellence - in terms of added value per employee in all classes of companies with 20 employees and above: in small (non-micro) companies with 20 to 49 employees; in medium-sized companies from 50 to 249 employees; in medium-large companies from 250 to 499 employees; and even in large companies with more than 500 employees.

In the first category of companies with 20 to 49 employees, the manufacturing added value per employee in Italy is 71,690 euros (59,250 euros in Germany). In medium-sized companies with 50-249 employees, Italy is at 92,850 euros (Germany at 73,870). In medium-large companies with 250-499 employees, Italy is at 101,560 euros (Germany at 80,330 euros). And, quite sensationally, even in large companies with 500 or more employees our country leads Germany, with 125,210 euros per employee (large German companies stop at 119,260 euros).

Italy is third in the G-20 for GDP per employee at purchasing power parity

The surprises regarding Italian productivity do not end here. Undoubtedly, at an aggregate level, our aggregate productivity has struggled to grow in the last 20-25 years, both due to the weakness of services and the repeated crises that have slowed down GDP. But Italy still has high aggregate productivity even if few people know it. In fact, according to World Bank data, Italy's GDP per employee at purchasing power parity, expressed in constant 2021 dollars, is the third among the G-20 countries, surpassed only by those of the United States and Saudi Arabia. Italy precedes France and Germany, as well as countries such as Canada, the United Kingdom, South Korea and Japan.

GDP per employee is Gross Domestic Product divided by the total employment of an economy. GDP at purchasing power parity (PPP) is GDP converted to 2021 constant international dollars using PPP exchange rates.