Preview of The Conference Board Report on Global Productivity

11:00 A.M. EST

MS. NISBET: Good morning and thanks for coming. I'd like to introduce two of the economists from the Conference Board, Bart van Ark and Catherine Guillemineau. They are here to talk about a report they have just co-written on global productivity. And I believe they're starting out with a presentation and then we'll go into questions and answers.

As always, please state your name before posing your question -- your name and affiliation. Thank you.

MR. VAN ARK: Thank you very much and good morning. I apologize for our fourth -- third call for Bob McGuckin not to be here. Actually he has done these presentations of this productivity report, which we (inaudible) for the fifth time done presentations here at the Foreign Press Center a couple of times before, but he cannot be here today. This is the fifth time that we produce annual productivity estimates for most of the economies in the world. We started doing this in 2002 and we are the first one every year to produce productivity estimates for the latest year, so in this case for 2005.

This is based on the database which the Conference Board maintains together with a university in Europe, University of Groningen in the Netherlands. This database is accessible for the internet. You can go to the Conference Board website and you will be automatically guided towards the database where information on productivity and labor and GDP, labor input and GDP is available for over 100 countries, which are the largest countries in the world economy and therefore cover 98 percent of total world GDP. The other countries we are talking about are much, much smaller and, therefore, not taken up in the database right now.

What I will do is I will -- in the next sort of ten minutes -- quickly run you through a couple of slides. I will do that quickly; feel free to intervene right away if there is a specific question and of course there will be plenty of time for Q&A later on. What I will do is I'll make few remarks about the macro labor productivity estimates up to 2005, say a few words about somewhat longer on prospectives since 1987 and then focus the attention on free main sort of areas in the world. One is the U.S., Europe, Japan comparison. The second one -- are a couple of emerging economies and I singled out for today's presentation Poland, China, India and then a few remarks about sort of the rest of the world in our database.

Productivity is measured, as you can see here, as the gross domestic product, so the total national income, national product per hour worked -- the average hour worked. And here you see the average growth rates over the past 20 years since 1987 with specific numbers for the latest years.

A couple of observations here. First of all, we see that the U.S. productivity miracle of the first part of the century is now kind of slowing down. We see that from 50 growth in 2005 only 1.8 percent compared to much faster growth rates in the year before. to a large extent, this slowdown is a cyclical slowdown; the U.S. economy as a whole is slowing down, productivity is a typical, what we call, pro-cyclical indicator and, therefore, you would expect productivity also to slow down.

Europe, however, shows an even bigger slowdown. We had some recovery of productivity in 2004, but in 2005 you see that productivity in Europe, and this is the old European Union, the 15 countries which were a member before May of 2004 in 2005 only showed 0.5 percent growth. That's rather worrying because in Europe we actually sort of in an upward phase of the cycle and that productivity is pro-cyclical, we would actually have expected it to be better rather than worse.

I have to stress that the 0.05 percent is to a large extent impacted by the performance of Spain and Italy. You can see from the report, which all the individual country numbers are that Spain and Italy actually had negative productivity growth in 2005 and take this average down -- you would take Spain and Italy out, the number will be around 1 percent, which is still considerably lower than in the United States. I'll talk a little more about the new member-states later.

I just want to draw your attention to Japan. Japan has shown a significant recovery in productivity growth in 2004 but also slowed down in 2005. But I want to emphasize that Japan is still at the higher end of the OECD countries, doing considerably better than the old European Union countries and at about the same rate as the United States.

The other side of productivity, productivity and labor input together by sort of accounting identity add up to total GDP, so here you see the labor input performance. So that's the other side of the equation. Here we see that the United States is still doing reasonably well in 2005 with a 1.8 growth in total working hours; Europe also reasonably well, although lower than the United States. And in Japan again we see a recovery in labor input growth, which is very important because as you can see Japan has had a significant fall in labor input since the mid-'90s, but now seems to be on its way towards recovery in terms of labor input growth.

Well, despite these changes in short-term developments, productivity really is a factor of interest for the longer term. The short term, one to -- year-to-year is going is going to be very volatile. It's more interesting in a sense to look at a longer run. So what you see in this chart are the changes in productivity from, say the 1987 to 1995 period through the '95 to 2005 period. So it's about two decades we are looking at here. And then if you compare the green indicator for the United States, the blue one for the EU-15 and the red one for the -- the color picture on the screen -- the red one for Japan, you can actually see interesting differences. You see that the United States has moved from a 2 percent growth performance into a 3 percent GDP growth performance during this past decade. And also you can see there has been a switch around, in terms of more productivity growth and somewhat less labor input growth. So growth in the United States, since '95, has become strongly productivity driven.

In Europe, however, on the other hand, you see -- you see it go the other way around whereas European growth up the mid-'90s was strongly productivity driven. That productivity growth has now been going down. Employment growth has luckily improved because it was really necessary in the case of Europe, but it is certainly not as good as in the United States. And in Japan, of course, we have seen the problem since the mid-1990s and (inaudible) already early but Japan has been moving from a 2 percent growth (inaudible) into a 1 percent (inaudible), cutting on both productivity and employment growth. But as I said, in the last year we expect to see some recovery there.

In this chart we actually have been a little bit more specific about trying to distinguish between the cyclical trends on productivity and the structural trends. These lines are actually lines that show you the structural trends take out the cyclical components. And here you can see from the red line that the U.S. is in a structural sense a little bit stabilizing now. You see that -- the red line is leveling off, whereas the European countries are continuously on a downward structural trend. So if we look at some of longer term, it is clear that structural differences are very substantial between these countries.

Productivity is, as I said, measured by GDP per hour and it's strongly related to another indicator, a lot of economic performance indicator, which is the average GDP per capita. So the first one is GDP per working hour; the second one is GDP per head of the population, right. Generally there are strongly related. However, when we look at the differences between the EU-15 and the United States, there are actually interesting differences between these two indicators. You can see that European productivity, the blue line here, has been catching up with the United States. The U.S. is hundreds in this chart altogether, in catching up with the United States until the mid-1990s, continuously since World War II. But since the mid-1990s, because of slower productivity growth in the European Union, you now see the gap between the European Union, the old European 15 countries, I should say, and the U.S. opening up again.

However, so you see this important break under '95, however, there has been another important break point in the EU-U.S. comparison and that is in GDP per capita. Here you can see that there was already a break in the mid-'70s. Since the mid-'70s, per capita income in Europe has not really further closed its gap to the United States but always sort of, you know, stayed about 25 percent behind the U.S.

Now, the difference between these two indicators by definition is labor participation. Of course, when labor participation slows down in the Europe Union, compared to the U.S., this gap between labor productivity and per capita income is opening up and that is what we have seen since the mid-1970s up to the mid-'90s. Since then we see some improvement again but still there is a big gap in participation between Europe and the U.S.

Well, I'm not going to spend much time on these charts; we can get back to that during the Q&A, if you like. What we've done actually is to break down the income gap of 25 percent, which you see here at the bottom of the chart, into the compositions, into the contribution effects of productivity, which is the green part here. And then in addition, some labor market indicators like working hours, like labor force participation, like the share of the working age population. And what you see here is that the green bit, you see that up to mid-1990s the green bit is getting smaller, which means that Europe was closing the productivity gap, but since the mid-'90s it has been opening up.

We see that participation -- which are the blue part here -- that the participation actually has improved somewhat in Europe relative to the U.S. But the big difference between Europe and the U.S. is still in terms of working hours. So the amount of working hours per person in Europe is still considerably lower than it is in the United States and that is accounting for a significant part of the lower per capita income. If you work less hours, of course, the amount of income you take home is also considerably less on an annual basis than if you work more hours.

While there are differences here between countries, let me not talk about that right now. I'm happy to come back to that in a minute, but I want really to move to the second part of what I want to talk about and that's the rather spectacular performance of the emerging market economies in our data. What we see here is I singled out three countries which show very spectacular developments. The first one is Poland which actually shows a picture which is rather representative of what is going on in Central and Eastern Europe, generally the new member-states. Now, productivity growth was already fairly rapid since 1995, but in 2005, you see a further acceleration of productivity growth in Poland of 4.1 to 7.7 percent, right. So this is about fourteen times higher -- fifteen times higher than in the old European countries in terms of growth rates. And that's very representative for what is going on elsewhere in Eastern Europe. There -- also there has been an acceleration for 4.1 to 6.2 percent in 2005.

QUESTION: This is over a year's -- how many years' span?

MR. VAN ARK: This -- what you can see here is 4.1 and 7.7 is 2004 and 2005. Yeah. What is important to see here as well, however, is that there's a lot of productivity growth in Poland and other Eastern European countries in the past went together with significant increase in unemployment, so you see a fall in working hours. Since 2004, you actually see positive labor input growth in these countries as well. So we see that the productivity model in Eastern Europe has changed from a typical restructuring model as these countries went through a very difficult and painful restructuring process since the early '90s, into a model where they are actually expanding their markets, where they are realigning their competitive forces by growing markets, both inside and outside the EU. So in a sense, you could say this is more healthy productivity growth because it's not growth of productivity but also growth of employment. So in 2005, you see that Poland, in fact, grew its labor input by 1.4 percent on top of the increased productivity growth. So that's around (inaudible).

The second country to focus on, of course, is China. We have been aware of major changes in China over the past two, three decades. Of course, as productivity is pro-cyclical, we also see the faster growth of the Chinese economy coming back in the labor productivity growth rates. On the other hand, however, there are large uncertainties about the Chinese growth estimates. As you probably have picked up from the media, China has increased its GDP levels statistically a couple of months ago by 17.8 -- I'm sorry, 16.8 percent to take account of (inaudible) activities which were not counted in the statistics until then. And in addition to that, China has added another half percent to its annual growth rate of GDP.

We have -- we discussed these numbers actually in our executive action which you have. We are somewhat more conservative in estimates we show here. There's a large range of uncertainty here according to our estimates which are based on academic estimates of output growth in China, we actually argue that in the late '90s, productivity growth in China was perhaps somewhat slower than the official estimate suggests. But since 2000, we do indeed see a significant acceleration. And as you can see here, in 2004, for example, productivity growth is just high as 8.4 percent. So it's still, despite our somewhat more conservative estimates, a very, very high and substantive estimate.

Also the Chinese growth estimate of productivity is substantially higher than it is in the case of India -- 8.4 in 2004 compared to 4.4 in the case of India. But you have to realize that the Indian model is still very much more also based on growing its labor inputs. You can see that India's labor input grew by 2 percent in 2004, whereas Chinese labor input only increased by 1 percent, so they're just in a different phase of transition towards faster productivity growth.

Well, finally, a few words about the worldwide estimates. There is a table attached to your executive action where we show the productivity growth estimates for all 100 -- just over 100 countries we have in our database. Here we just summarize them in about eight regions as well as a world economy estimate. So here you see the growth rate from '95 to 2004. You see that the fastest growth rates of productivity are indeed in Eastern Europe, Central Eastern Europe as well as Asia but that, indeed -- that countries in Latin America, in the Middle East show substantially lower productivity growth, whereas the African countries actually do show some recovery, in particular to -- compared to the negative growth rates they had before the mid-'90s.

Productivity can also be expressed for these regions in terms of the level relative to the United States, of course, the advanced countries have much higher levels. But again we see that Asia as well as Eastern Europe still have a very large potential to catch up in terms of productivity, compared to the advanced countries. So despite high growth rates, the levels are still around 20 percent in the case of average Asia, even around 15 percent of the U.S. level.

So concluding, the long-term trends show there's a continued strength in the United States in terms of productivity performance, continued weakness in the EU-15, cyclical factors are dominating the numbers of 2005, in particular, in the case of the U.S. Emerging economies show rapid productivity growth but still have a very long way to go in terms of catching up with the advanced countries. And one side remark, productivity numbers always need to be treated with some caution, in particular, the latest estimates which have a strong preliminary nature to it. And typically, we argue that you have to handle a margin of about open 2 percent in terms of uncertainty and the growth rates and 3 percentage points in terms of levels.

For future prospectus, we stress the fact that cyclical effects may continue to dominate productivity slowdown in U.S. in 2006 that the EU-15 may actually benefit from its cyclical upswing in 2006, but it still has to come to terms with all the challenges to globalizing the economy in Europe. Emerging economies have to balance their increase in resources in labor inputs and their rising productivity. We can also discuss this in more detail later about the importance of the productive use of technology, which is an important part of the work we do at the Conference Board on explaining these productivity differences, as well as differences in the performance of labor and product markets, but I guess this can be something we can come back to, if you wish to, on the Q&A.

MS. NISBET: So we can go ahead and open this up to questions. Again, please state your name and affiliation before asking a question. We only need you to do this one time around, but it's helpful for transcripts.

QUESTION: Good morning. Jamie McGeever, Reuters News. You don't have any forecast for China (inaudible) of 2005?

MR. VAN ARK: No, that's correct because the numbers, as I said -- even the numbers for the OECD countries have a preliminary nature to it. The numbers for China and for India are for 2005 are, in fact, not yet available. On the GDP side, there are forecasts available, particularly on the employment side. We do not have these numbers right now. But generally, looking at the GDP forecast for 2005, both countries have shown continued GDP growth in 2005, compared to 2004. So I would not expect that, neither for China nor for India, these numbers are slowing down very much in 2005, 2004.

QUESTION: Lillian Lin, Central News Agency. Sir, what will be the impact of outsourcing to emerging economies?

MR. VAN ARK: That's a very good question. Let me take a start on it and maybe my colleague wants to add something to that. Outsourcing is a continuous process in a globalizing economy. It is used by countries or by companies and therefore by countries to realign their competitive forces. This means that companies in western countries are outsourcing those parts of their production process, where they think they can actually achieve higher productivity growth, lower cost because of higher productivity growth in the countries to which they are outsourcing. So there's definitely a positive effect on the emerging economies themselves.

The interesting question and the debate, of course, is what is happening to the advanced countries that are outsourcing themselves. And here, of course, you have to look at the dynamics of the process over time. If this makes it possible for countries to realign the competitive markets -- the competitive forces and to grow their markets, because they have a more efficient way of distributing the various activities in the production process even the companies in the -- and the establishments we advance (inaudible) benefit from this process and be able to grow productivity. So -- and generally my answer would be that this is a process that is certainly supporting productivity growth in the sum of longer run, although short run effects of outsourcing can sometimes be quite substantial in terms of, you know, the immediate impact it they have on the growth of sales and revenue in a particular country.

MS. GUILLEMINEAU: I haven't got too much to add to that, but everybody is right, that is a very good question because when you look at the results for 2005 and 2004, while the emerging economies, indeed, what is very obvious is that the leaders in terms of particularly the (inaudible) this country as you might think that they benefit from outsourcing from (inaudible) Central Europe, China and India. Central Europe, for instance is probably benefiting from investments from German and American companies chiefly. And regarding the impact on advanced economies in the long term, then I fully agree with Bart, too, that hopefully this trend will have advanced economies to reorganize their predictive structures and to go towards predictions, using more high-tech technologies and to improve that productivity results in the future. But so far, we haven't seen that so much. That is what we hope we'll see.

QUESTION: Along the lines of (inaudible) jobs (inaudible) what was your sort of counteractive (inaudible) on why it is so much better than you've stated here, but you have so many problems with outsourcing (inaudible?)

MS. GUILLEMINEAU: Well, it's very difficult today (inaudible) are in terms of no (inaudible) growth and that's why the -- so the question is what is the impact on (inaudible). As you can see in the charts that Bart has prepared, there was an increasing factor in the numbers of -- in the number of (inaudible) in 2005 and that increase was bigger by 2004 in the EU-15. So that suggests that, in fact, outsourcing wasn't so bad for employment, wasn't so negative. Well, of course that increase in the (inaudible) how to deal with a cyclical position of the EU-15 economies. At least that shows that our outsourcing cannot have such a negative effect on employment that is going to offset the normal course of the business cycle. But we -- but --

MR. VAN ARK: Well, I think what I would add to the continuous debate on outsourcing is that it is part of a bigger debate on the globalization of business activity. Outsourcing goes together with -- what you make call between (inaudible) insourcing of new employment. It's actually the turning around of employment which matters. So --whereas some activities may actually be outsourced, at the same time advanced (inaudible) are insourcing other activities, so there isn't an old issue and question about, for example, immigration or skilled labor which is very highly needed in many countries in which -- particularly in many European countries at this moment is a very problematic issue also in the United States to some extent. So I think it's not just a matter of economic activity disappearing from here to -- or from advance countries to emerging economies, but also the other way around which is an important part of the debate. And my bottom line would be that in the end, this allows firms and companies to reallocate their resources to their most productive users. And if you reallocate your resources to those places where you can use them most productively, it also is the best chance to increase your markets, to bring new products and services and to raise living standards.

QUESTION: Tomasz Deputla, Newsweek Poland. I have two questions regarding the first two charts. On the first chart you show, it looks like European Union members had a huge growth of productivity. However, it doesn't -- there is no big relation with (inaudible) in the European Union results. Can you explain why it didn't happen? And another question on another chart is it looks like those developing total working hour -- working hours in the whole world. Are we (Inaudible) to what plan, as a (inaudible?)

MR. VAN ARK: Well, in your first question, I think it's an excellent question to actually ask ourselves why is it that these new member-states in the European Union are showing this enormous productivity growth and why do the old member-states at this moment not benefit from this? Frankly, I do think that we are in the process of -- within the European Union of now, you know, realigning (inaudible) forces. So we are in the process up to accession the new member-states were restructuring their economy, and as I mentioned earlier, at quite high cost in terms of, you know, big loss in employment, you know, future unemployment rates.

Now these countries are actually realigning competitive forces in (inaudible) markets in which they can grow, both in terms of productivity and labor (inaudible.) This definitely has implication for Western European countries. These are the biggest markets for these new member-states. We already have seen some processes going (inaudible), some outsourcing, for example from EU-15, in particular, from Germany to some of the new member-states, but also from new products and new services entering the European market. Now let me focus on the services side because I think that illustrates, I think, why we at this moment see this difference.

In my view services are, you know, developing at very productive activities in Eastern Europe. For this reason, the European Union has placed a European Services directorate on the table to liberalize services flow within Europe. This has been put off the table a year ago and is now being revamped in something that looks like a rather watered-down version. So at this moment, there is still a reaction in Western European countries to try to keep these services out of the door. But in the longer run, that will, of course, not happen. So I think the process of structural reforms in Western Europe is actually slowing down, due to this plan -- position to those kind of reforms that are needed to actually make this convergence of productivity possible. But I think we will definitely go in to see a realignment and a convergence of productivity within the European Union.

And your second question, it very much depends between countries. In the European Union, as I mentioned earlier, we have seen an improvement in labor force participation since the mid-1990s. It was a much needed improvement because participation rates were relatively low in Western Europe. We have actually seen that go together with a slight -- at least part of the productivity slowdown may be due to the fact that we actually increased participation and therefore, you know, started up more, sort of low product and activities. However, other research we have been doing at the Conference Board shows that this rise in labor input in the longer run is not effecting productivity growth.

If you look at the United States and also some other non-European OECD countries, it shows that they have been able to grow employment and productivity at the same time. So this idea that there is a tradeoff between employment growth and productivity is not correct. Actually, the healthy way of growing your economy by bringing in more labor to the labor market and make sure that that labor becomes more productive, which is related to some of the issues I was mentioning in the first part of your question.

QUESTION: I'm just wondering if (inaudible?) How trustworthy this labor productivity rate, according to the economic development of the countries and (inaudible) as well your conclusion that your -- your research shows continuous strength in the U.S. and (inaudible) in the European Union because as far as I know, Poland for instance has 70 percent of unemployment. So this very -- very rapidly growing GDP (inaudible) in Poland, what does it mean exactly because this fact that the working part of the (inaudible) they pay for the life of 70 percent of the other population. So how relevant is this GDP per employee regarding to the economic development of the countries (inaudible) I just --

MR. VAN ARK: Well, let me give you a first answer and then maybe Catherine wants to follow up. As I emphasized before, productivity estimates are estimates which you have to take because (inaudible) that's by the way, true for most of these things with a certain amount of uncertainty. If you look at the specific case of Poland or any East European countries, the band, you know, for uncertainty is so small that it still shows that these countries are way ahead in terms of productivity growth towards -- compared to some other countries, for example, countries in Western Europe. An important point you make is, you know, to what extent is this a relevant number if there's such a big part of the population actually unemployed, well, indeed, that's what we have seen in the numbers for these countries that up to about two, three years ago, productivity growth went together with an increase in unemployment with a full (inaudible) participation. It's, of course, had a negative effect on per capita income growth.

Now we see actually a change in this process. We see that actually that unemployment is going to fall, that labor participation is going to increase and then we will see a double effect on the per capita income because per capita income living standards of the average population will then not only grow because of productivity, but also because more people can share in the (inaudible) that is becoming available and that is distributed among the population. So yes, these countries still have a long way to go in terms of bringing these very high unemployment levels back. But I do think that 2004 -- 2003-2004 has shown a very important change in the growth (inaudible) these countries (inaudible) way of trying to bring back unemployment levels to more acceptable levels than where they're at now.

QUESTION: Can you (inaudible) labor productivity rate (inaudible) to make the general conclusion that some commonly shared (inaudible?)

MS. GUILLEMINEAU: Can you please repeat your question, your last question?

QUESTION: So I just (inaudible) that probably to make that conclusion that some economies are growing faster than others, besides the GDP for employers have to calculate some other factors. And for instance, it was with the unemployment rates as something like that because if you calculate the GDP per capita per employee, it doesn't mean that the whole economy of the country is growing so rapidly because gross product (inaudible) they have to pay for unemployment. So the people that are unemployed can meet these people that are -- for instance, we've fallen 70 percent of the population, it means that -- so the living (inaudible) is not so high as it would be (inaudible?)

MS. GUILLEMINEAU: (Inaudible) in the different phases in the development of a country and before higher growth effects or impacts on -- over sectors of the economy takes time. But the first tape is that increase or takeoff in productivity growth and which that is very interesting to see that happening now in Central Europe. Just following their (inaudible) last year to EU-15. So that shows a very simple dynamic underway and you are perfectly right that it's not -- it hasn't benefited at all parts of the economy yet. But as far -- say, the idea is that then if it was referred to the rest of the economy and then we should see an increase in (inaudible) participation and we are seeing the first signs of it of decline for lower unemployment. But not everything can happen at the same time in an economy and that's true that these countries have still a long way to do that. They seem to be really on the right track and that is very encouraging.

MR. VAN ARK: We are -- but I certainly agree that you need to look at more factors than just productivity. And in fact, we are as Conference Board involved in an international consortium where we actually develop what we call a system of growth accounts for individual countries in the world that we try to look how productivity and employment growth and the growth of new technology, the growth of skills and education, how that fits together in contributing to economic growth. So you're absolutely right that positively you cannot be using that indicator.

QUESTION: (Jamie McGeever, Reuters) Along the same lines of that, I mean, are they comparing apples with oranges, as regards to the U.S. and Europe and unemployment (inaudible), you know, 10 percent, you know, 5 percent. But the way this is done or calculated is very different because if you use the same measures here in the U.S. as you use in general (inaudible), unemployment would be 90 -- 100 percent here. Isn't that true?

MR. VAN ARK: Well, I'd be interested to hear from you on which basis you would argue that to be the case. I mean, we tend to -- there are certainly differences in terms of the measurement of gross domestic product and the measurement of employment in the individual countries.

QUESTION: But here in the U.S., where unemployment percentage is only of those who are actively trying to find work. Whereas, in Europe, there's the working population in general, which is obviously a larger number, isn't it?

MS. GUILLEMINEAU: Well, the definitions should be fairly similar. Of course, you are right (inaudible) that these differences are not so big that they won't suggest that the actual unemployment rates differ as much as you say because, in fact, in Europe, too it's the -- the people who are counted as unemployed are the people who are actively seeking for a job -- looking for a job -- sorry. So it (inaudible) there might be some differences, but maybe they won't expand the 0.5 percentage points, but not such a big difference.

QUESTION: And my second question is going to be why is productivity such an important number? I mean, why is it so important for people's lives, (inaudible) 1 percent growth or 2 percent?

MR. VAN ARK: Right. Well, I think what we tried to show in this work is that there actually two factors that contribute to the rise in per capita income and living standards. So assume that living standards can be reasonably processed by the efforts cross domestic product (inaudible) the population, so to average income per capita there are two factors that contribute to that. One is a rise in labor force participation -- more people sharing in the (inaudible) and the second is the rise in productivity. That's the output that is produced per hour. Now these two forces and by -- in accounting identity and to this GDP per head of the population, labor productivity is a very sort of simple, easy concept to understand, the efficiency by which we can use labor. And as you correctly suggested, you need to further break that down to understand what it is that is driving these differences and how it interacts with participation. But I think if you look at the long-run performance of the economies, we see that countries which raise their per capita income do this primarily because they raised output per working hour in that economy. That's the main driver of a long-run growth fund. Of course, you need to add people to the labor market, but you cannot go on forever adding people to the labor market. You cannot go on forever to raise their working hours beyond, say, 50 hours a week or limits to that. So in the end of the day, it is the productivity that is made by these hours that is making a difference. So that why we really think it's very important to figure and a very important indicator to sort of monitor in the long run performance (inaudible.)

QUESTION: But -- according to the data you presented, there is no way for the old European Union to catch up with the United States in the conceivable future?

MR. VAN ARK: Well, I would not --

QUESTION: I mean (inaudible) at least one strategy when they applied to (inaudible) for the United States, but it looks like you have (inaudible?)

MR. VAN ARK: Well, there are serious problems in the European Union at this moment to make sure that we organize and structure the economy in such a way that we can make sure that these productive forces are going to be fully exploited. So I gave the example of the (inaudible) directed which, in my view, is a crucial instrument by way -- you know, we can make sure that, you know, labor (inaudible) and services are properly spread across the European Union. There are some other measures in the labor markets, as well as in the product market that Europe will need to take in order to face these challenges that the global economy is good for them. I am not (inaudible) just a state of mind. I am not so negative that I say it's not possible. And actually, maybe Europe will definitely (inaudible) by the circumstances to do it. I mean, there's a limit to how far you can go by sort of slowing this process down. And I think there's a large awareness certainly among the business world with the Conference Board, very strongly involved as well as among policymakers that things need to be changed. But it is also true that the society find it very difficult to make these changes. This, by the way, is true everywhere and therefore policymakers should very much focus on making sure that this transition process, such a new environment is somehow facilitated.

And one of the questions we have to ask ourselves is that in these kinds of process are winners and losers. You know, so I have to think about losers. And you cannot -- leave them on their own. Those are (inaudible) and important (inaudible) and that's also true for you. But the solution is not just to stop the process, but try to slow it down because, you know, it will come back to you, you know, in a bigger way than you know, (inaudible.) So I'm not negative in the sense that it is impossible for Europe. But yeah, they have to work much harder than is presently done (inaudible.)

QUESTION: Thank you. Kirsten Buzzi from Norway. Are we in this statistic?