By Matthew Dalton
Southern Europe has a productivity problem. Workers in Greece, Portugal, Spain and Italy all produce below the euro-zone average per hour worked; the difference is particularly stark for Greece and Portugal, two of the countries getting loans from the euro zone and the International Monetary Fund.
Why? You frequently hear baseless speculation that southern Europeans don’t work as “hard” as their northern counterparts, whatever that means.
One explanation actually supported by the data is that southern Europeans are more likely to work on farms, and agriculture is a low-productivity (yet very-hard-work) sector. The divergence is particularly noticeable for Greece and Portugal: 12% of Greek workers and 7% of Portuguese work in agriculture, forestry or fishing, according to Eurostat data from 2010. The euro-zone average for employment in the sector is 3%. Just 2% of German workers are employed in agriculture (forestry or fishing).
Spain and Italy are slightly above the euro-zone average, each with 4% of the labor force employed in the sector. But in the two countries’ less productive regions – southern Italy, for example – small farms are significant employers.
Small farms are particularly common in Greece, explaining why a higher percentage of Greeks work in agriculture than any other country in the euro zone.
A rural landscape dotted with small, family-owned farms sounds charming, but it’s actually a recipe for low productivity. Labor productivity improves dramatically when workers live in cities. That’s why stories about Greeks moving out of Athens and back to work on farms aren’t a welcome development. Working is better than being unemployed, but the Greek economy needs to become less agricultural, not more so.
But what can the European Union do? It’s hard in a democracy to quickly engineer large structural shifts in the economy. China’s massive internal migration from the country to cities has been astounding, but Chinese peasants are orders of magnitude poorer than Greek farmers and thus face much stronger incentives to move. And then of course, there are jobs in Chinese cities.
One idea might be to reform the EU’s system for doling out subsidies to its farmers. That’s already underway, but the direction these reforms are taking doesn’t seem to acknowledge that making farms more productive will (and should) reduce the number of people working on farms and living in the country.
That’s the problem with the EU’s “Rural Development Policy.” Farming is something that should be done in the countryside, where land is cheaper. But why spend money to “diversify” the rural economy? What’s the vision here: a tech start-up stuck in the middle of a former corn-field?
People leave the country for cities, because wages in cities are higher — and that’s because workers are more productive in cities. Why use EU funds to fight against that trend?
Follow @DJMatthewDalton on Twitter.