Rising productivity, rising challenges – What’s the impact on income, decent work, and improved livelihoods?

Is productivity the key to better lives worldwide, or does it only lift a select few? ILO EMPLOYMENT explores this “trillion-dollar question” in its Global challenges – Global solutions podcast, unpacking what it really means for workers, wages, and economies.

Productivity is often touted as the engine driving economic growth, higher wages, and global competitiveness. But, with rapid technological shifts and rising climate pressures, boosting productivity may not benefit everyone equally.

In this episode, experts Gaaitzen de Vries, Associate Professor, Department of Global Economics and Management of the University of Groningen, Netherlands, and Luca Fedi, Employment specialist of the ILO Productivity Ecosystems for Decent Work project, break down what makes productivity so vital—and whether it can drive inclusive progress for all.

De Vries explains that real productivity growth demands structural change—moving workers into more efficient, high-value activities. “We know that convergence to these higher productivity levels is often associated with factors including greater political stability, better education systems, and more diversified economy and integration into global value chains,” said de Vries. “When countries invest in education and skills, they don’t just raise productivity—they build resilience. Several developing ccountries, like most recently Viet Nam, have used these changes to accelerate their economies”, he adds.

For Luca Fedi, the data speaks volumes: nations with low productivity generally have lower employment, while those with high productivity maintain robust job markets. “When productivity grows, wages and working conditions can improve and is also associated with better-quality jobs,” Fedi says. “It is clear there is a direct correlation between formal employment and productivity.”

A key focus of the ILO is to advance decent work, and that is “why productive employment and productivity have been at the core of the ILO mandate for a long time”, Fedi notes, stressing the need for inclusive growth policies that make these benefits accessible for all.

“Each country faces its own productivity challenges. In South Africa, per capita income has stalled, while Ghana sees moderate production growth and improving job quality. Viet Nam stands out as a model, achieving remarkable productivity gains over the past 20 years. These cases highlight how diverse economies approach the ‘productivity puzzle’, as de Vries describes it, and what policymakers can learn”.

With technology reshaping manufacturing and services, de Vries emphasizes the importance of analysing specific tasks within global value chains. For example, the Netherlands may be known for their vivid tulips in a sea of fields throughout the Dutch countryside, but most of the cultivation happens in Kenya, where the production costs are lower. The Dutch still manage expertise and logistics, adding value in a way that maximizes productivity across borders. “The Netherlands then excels not in production, but in organizing the transport, developing the technologies and creating innovative marketing strategies,” said de Vries.

The old adage “a rising tide lifts all boats” hints at what inclusive productivity could mean. But achieving this will take deliberate policies that connect economic gains with decent work. As the world adapts to rapid changes, the ILO is calling for innovative new strategies to ensure that productivity lifts everyone—not just a few. Tune in to hear how productivity can be more than just a number, but a catalyst for global progress.

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Article by Emilie Smith, Communications Intern, Department Management Coordination Unit (DMCU)/ ILO Employment Policy, Job Creation and Livelihoods Department.