PwC/Strategy&
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PwC/Strategy&
Mixed Chart
Professional Services
Strategic Planning
Bar chart depicting real GDP per employed worker over several years.
Introduces PwC’s PPI, which incorporates various forms of capital to measure productivity potential more comprehensively.
Productivity, GDP, Economic Growth, Index, PwC
date
Strategy& PwC’s PPI adopts a ‘multiple capitals’ approach to defining, modelling, and measuring productivity. In their new report “ In Search of Productivity: The Next $50 Trillion In the Global Economy ”, the Strategy& Middle East Ideation Centre* put forward a solution to this: the Productivity Potential Index (PPI). To traditional measures of productivity (human, physical, innovative and other intangible capital), the PPI adds pillars for social capital, natural capital, and institutions. As illustrated on page 6, the PPI consists of 19 variables grouped into six pillars. A primary innovation of the PPI is to adopt a ‘multiple capitals’ approach to defining, modelling, and measuring productivity. By encompassing human, physical, natural, social, institutional, and intangible capital, it draws on a wide range of economic research and offers insights across the full spectrum of productivity policy. Economies stand to benefit greatly from improved productivity levels. Productivity gains can lead to an acceleration in the growth rate of a country’s gross domestic product (GDP) over time. For example, for the 25 economies assessed in the PPI report, their existing real GDP growth rate is forecast by the World Bank at an average of 2.6% p.a. over the coming decade. If each country addressed their weakest productivity factor and matched it to the best in class among the sample, average real GDP growth can accelerate to 3.5% p.a. across the group. Note that the PPI is also fully aligned with the “Beyond GDP” movement that we explored in the May 2023 edition of this report. The results of our research indicate that the sources of future growth and innovation in economies are diverging from and GDP components and becoming increasingly aligned with net zero social cohesion. As such, the PPI will be a useful indicator for understanding the future sources of GDP growth and for delivering on the United Nations Sustainable Development Goals (SDGs). Strategy&’s Productivity Potential Index (PPI): A new way of looking at productivity.
