Published: 2 December 2025
A new study by the European Employers’ Institute (EEI), conducted by Rexecode, finds that the EU–US labour productivity gap has widened significantly since 2019.
In 2024, EU hourly labour productivity reached $72/hour (PPP) compared with $116/hour in the United States – a 38% gap. Over 2019–2024, US productivity grew by +9.7%, while the EU recorded only +2.4%, deepening the gap by 6.7%.
The report highlights four main drivers: the EU’s employment-preservation approach during the pandemic, the US digital and AI investment boom, Europe’s industrial competitiveness shock (energy, regulation, China), and weaker private demand and investment.
“The message is clear: Europe must remove barriers to competitiveness and step up investment if it wants to close the gap,” said Delphine Rudelli, Chair of the Board of EEI “Productivity must return to the centre of the EU’s growth strategy.”
The study warns that the EU now faces both structural and cyclical disadvantages, while the US benefits from a strong technology-driven rebound.
About the study
This study is the third in a three-part series analysing the EU–US labour productivity gap. It follows the first report, “Understanding the EU–US Labour Productivity Gap: #1 – The Broad Perspective” (15 September 2025), and the second report, “Understanding the EU–US Labour Productivity Gap: #2 – A Granular Analysis (1995–2019)” (30 October 2025), which examined long-term sectoral and country-level dynamics. The third study, “Understanding the EU–US Labour Productivity Gap: #3 — The Amplified Divergence (2019–2024)”, focuses on the most recent period marked by the pandemic, energy crisis, and geopolitical tensions.
About the European Employers’ Institute
The European Employers’ Institute (EEI) is a research institute founded by European and national employer organisations in March 2024. The EEI focuses on emerging employment and social policy topics at the European level, producing research studies, analyses, and publications. It aims to ensure balanced representation on employment issues and strengthen social dialogue at the European level.
For more information: Delphine Rudelli: info@eei-institute.eu / + 33 6 87 71 51 12
Published: 30 October 2025
The second study on productivity, commissioned by the European Employers’ Institute (EEI) and conducted by Rexecode (France) offers a detailed country- and sector-level analysis of the EU–US productivity gap over the 1995–2019 period. The findings show that the core EU economies – Germany, France, Italy, Spain, Belgium, and the Netherlands – are the main contributors to the EU’s slower productivity growth, despite their strong overall contribution to the European economy.
While newer member states in Central and Eastern Europe have achieved faster productivity growth than the United States, these gains have not been sufficient to offset the weaker performance of the larger economies, which account for most of the EU’s total value added. The study, therefore, concludes that internal convergence within the EU has not translated into greater competitiveness at the global level.
The report identifies underinvestment in innovation, digitalisation, and intangible assets as the key source of divergence. In Germany and France, productivity has kept pace with the US in efficiency terms (TFP), but limited investment in ICT and intangible capital has constrained progress. In contrast, Italy and Spain face deeper structural challenges due to slower TFP growth linked to weaker innovation diffusion and organisational efficiency. The gap is most pronounced in information and communication technologies, followed by professional services and manufacturing.
“This new piece of research highlights the importance of understanding Europe’s productivity dynamics in all their complexity. By combining rigorous analysis with a granular perspective, we believe at EEI that it offers valuable insights to guide policymakers and business leaders in shaping a more competitive and resilient European economy,” said Delphine Rudelli, Chair of the Board of the EEI.
The study also looks at how the EU–US productivity gap has evolved over the past decades: before 2007, there was a 1%-point growth gap mainly in manufacturing and services; between 2007 and 2019, both slowed, but the US pulled ahead in ICT; since 2019, the gap has widened further, especially in ICT and business services.
The study ‘Understanding the EU-US labour productivity gap: #1—The broad perspective’ updates the picture of the labour productivity gap between the US and the EU, highlighting why the gap exists, how it differs across countries, and the main factors behind it. It is the first in a series of three focusing on the comparative analysis of labour productivity in the EU and the US.
The European Employers Institute (EEI) is a research institute, founded by European and national employer organisations in March 2024. The EEI focuses on emerging employment and social policy topics at the European level, producing research studies, analyses and publications. It aims to ensure balanced representation on employment issues and strengthen social dialogue at the European level.
For more information:
Delphine Rudelli: info@eei-institute.eu / + 33 6 87 71 51 12
Published: 15 September 2025
The overall economy-wide hourly labour productivity in the EU has grown by an average of 1% per year over the past 25 years, compared to 1,8% in the US.
An independent study commissioned by the European Employers’ Institute (EEI), and led by the research institute Rexecode, identifies 11 key factors behind Europe’s labour productivity lag, including business dynamism, human capital and skills mismatch, limited ICT investment, as well as the administrative complexity and regulatory burden.
Looking at the wider economy, the study shows that while all sectors are affected by this gap, the impact has been greatest in information and communication (ICT), business services, and industry.
The study also stresses what has already been highlighted in the Draghi report: the fragmentation of the European internal market and the regulatory hurdles hinder innovation and productivity gains of European companies. Additionally, investments in emerging digital technologies are too low in Europe.
“Europe’s productivity gap with the US goes beyond just technological lag or investment shortfalls – it’s also fuelled by the ever-present regulatory burden. This might not raise any eyebrows. The same regulatory complexity that businesses have been grappling with for decades continues to serve as a significant roadblock to innovation and growth. European companies face a maze of costly, inconsistent regulations across member states, draining resources that could otherwise boost productivity through ICT or R&D. The administrative burden has long been the “silent partner” in Europe’s productivity problem. This study arrives at the best time, when the EU needs to address its competitiveness and productivity issues,” commented Delphine Rudelli, Chair of the Board of the EEI.
The study also looks at how the EU–US productivity gap has evolved over the past decades: before 2007, there was a 1%-point growth gap mainly in manufacturing and services; between 2007 and 2019, both slowed, but the US pulled ahead in ICT; since 2019, the gap has widened further, especially in ICT and business services.
The study ‘Understanding the EU-US labour productivity gap: #1—The broad perspective’ updates the picture of the labour productivity gap between the US and the EU, highlighting why the gap exists, how it differs across countries, and the main factors behind it. It is the first in a series of three focusing on the comparative analysis of labour productivity in the EU and the US.
The European Employers Institute (EEI) is a research institute, founded by European and national employer organisations in March 2024. The EEI focuses on emerging employment and social policy topics at the European level, producing research studies, analyses and publications. It aims to ensure balanced representation on employment issues and strengthen social dialogue at the European level.
For more information:
Delphine Rudelli: info@eei-institute.eu / + 33 6 87 71 51 12
Published: 3 September 2025
A new independent legal study, commissioned by the European Employers’ Institute (EEI) and led by the Associate Professor at Stockholm University, Erik Sinander, looks into the legal implications of restricting subcontracting following the call of the European Parliament “to introduce an EU general legal framework limiting subcontracting and ensuring joint and several liability through the subcontracting chain”.
The study warns of the legal complexity and EU fragmentation that could result from introducing restrictions on subcontracting and potentially destabilising a wide array of industries from construction and manufacturing to logistics and services.
Subcontracting is a common and essential practice in modern economies, where businesses delegate contractual obligations to third parties. Because subcontracting enables, in particular, smaller companies to compete effectively, restrictions limiting subcontracting tiers risk undermining competition by disproportionately benefiting larger companies that are able to perform tasks internally.
No existing EU legislation currently limits subcontracting tiers, making such proposals unprecedented and legally challenging.
The study points to significant definitional challenges surrounding subcontracting, including the difficulty of clearly distinguishing between subcontracted services and purchased products, as well as defining the scope of subcontracting chains within supply and value chains.
It also warns of potential negative impacts on sustainability and regional economies. As a matter of fact, restricting subcontracting could force companies to replace repair or refurbishment services with new product purchases, increasing waste and reducing local employment opportunities.
As Brussels continues to debate a possible legislative instrument on subcontracting, this timely study underscores the risks of implementing overly restrictive measures that could inadvertently stifle business growth and job creation.
“This legal analysis provides a crucial perspective on the challenges of further regulating subcontracting. The risks to the well-being of workers where these exist are a critical issue that must be addressed, but the solution lies not in blanket restrictions on subcontracting. Such measures could have serious consequences for businesses, especially small ones, and therefore for the jobs that their economic growth helps to create. Existing labour protections should be enforced more effectively, and where necessary, the role of labour authorities must be strengthened to ensure compliance. We must focus on a balanced approach that protects workers’ rights while maintaining the competitiveness of the EU’s internal market”, commented Delphine Rudelli, Chair of the Board of the EEI.
The European Employers Institute (EEI) is a research institute, founded by European and national employer organisations in March 2024. The EEI focuses on emerging employment and social policy topics at the European level, producing research studies, analyses and publications. It aims to ensure balanced representation on employment issues and strengthen social dialogue at the European level.
For more information:
Delphine Rudelli: info@eei-institute.eu / + 33 6 87 71 51 12