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Personnel Costs and Labour Productivity: The Case of European Manufacturing Industry

Author

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  • Alina Stundziene

    (School of Economics and Business, Kaunas University of Technology, 44249 Kaunas, Lithuania)

  • Asta Baliute

    (School of Economics and Business, Kaunas University of Technology, 44249 Kaunas, Lithuania)

Abstract

The objective of the article is to evaluate the impact of personnel costs on apparent labour productivity by employing the 1995–2018 panel data of the manufacturing industry in 27 European countries. The methods of independent samples t -test, correlation analysis, Granger causality test, unit root test, and ARDL were employed. The analysis shows that a long-term relationship exists among personnel costs and apparent labour productivity, and there are not significant differences among European countries concerning the impact of personnel costs on apparent labour productivity, but it varies in time. Companies often avoid increasing wages, as it decreases the profit of the company, and seek to increase the turnover in order to reduce the cost of goods sold. This research shows that growth of personnel costs does not necessarily mean lower profitability. The growth of personnel costs increases the gross operating rate if the turnover per person employed is stable. Turnover growth has a positive effect on apparent labour productivity, but a negative impact on the gross operating rate. Thus, the impact of turnover on apparent labour productivity is significantly lower than the impact of personnel costs on apparent labour productivity.

Suggested Citation

  • Alina Stundziene & Asta Baliute, 2022. "Personnel Costs and Labour Productivity: The Case of European Manufacturing Industry," Economies, MDPI, vol. 10(2), pages 1-17, January.
  • Handle: RePEc:gam:jecomi:v:10:y:2022:i:2:p:31-:d:734779
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    References listed on IDEAS

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    1. Sandra E. Black & Lisa M. Lynch, 2001. "How To Compete: The Impact Of Workplace Practices And Information Technology On Productivity," The Review of Economics and Statistics, MIT Press, vol. 83(3), pages 434-445, August.
    2. Antonia López‐Villavicencio & José Ignacio Silva, 2011. "Employment Protection And The Non‐Linear Relationship Between The Wage‐Productivity Gap And Unemployment," Scottish Journal of Political Economy, Scottish Economic Society, vol. 58(2), pages 200-220, May.
    3. Andrew Sharpe & Jean-François Arsenault & Peter Harrison, 2008. "The Relationship between Productivity and Real Wage Growth in Canada and OECD Countries, 1961-2006," CSLS Research Reports 2008-08, Centre for the Study of Living Standards.
    4. Bildirici, Melike & Alp, Aykaç, 2008. "The Relationship Between Wages and Productivity: TAR Unit Root and TAR Cointegration Approach," International Journal of Applied Econometrics and Quantitative Studies, Euro-American Association of Economic Development, vol. 5(1), pages 93-110.
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    1. Ladislav Suhányi & Alžbeta Suhányiová & Jaroslava Kádárová & Jaroslava Janeková, 2023. "Relationships between Average Wages in the Manufacturing Sector and Economic Indicators of the Manufacturing Sector in the Region of Visegrad Group Countries," Sustainability, MDPI, vol. 15(5), pages 1-19, February.

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