Understanding the EU-US labour productivity gap #3 – The amplified divergence (2019–2024)

Published: 2 December 2025

Author: Olivier Redoulès, Economist, Rexecode

This third study provides an updated assessment of the EU–US labour productivity gap over the period 2019–2024. The findings confirm that the EU’s productivity lag – already structural – has widened sharply in recent years. In 2024, EU hourly labour productivity averaged $72/hour (PPP) compared with $116/hour in the US, a 38% gap visible across all major sectors.

The divergence has accelerated since 2019: US labour productivity grew by +9.7%, while the EU increased by only +2.4%, resulting in a 6.7% deterioration in the EU/US ratio. This widening occurred in three phases: a sharp gap in 2020, temporary stabilisation in 2021 – 2022, and a renewed, broad-based lag in 2023–2024.

The study identifies four key drivers:

• Labour-market responses during the pandemic, with the EU favouring employment preservation and the US allowing stronger adjustment in hours worked.
• The US digital and AI boom, which has significantly boosted value added growth.
• An industrial competitiveness shock in Europe, linked to energy prices, regulatory pressures and intensified Chinese competition.
• Lack of internal competitiveness in the EU relative to the US.

Overall, the 2019–2024 period marks a turning point: the EU’s productivity slowdown has become more pronounced, while the US has strengthened its performance, increasingly driven by high-tech sectors. Europe’s ability to reverse this trend will depend on its capacity to accelerate investment, improve competitiveness, foster innovation and support productivity-enhancing transformation across sectors and member states. Deeper market integration within the EU, in particular for services and capital, is a key lever.