Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
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DOI: 10.5817/CZ.MUNI.P210-6840-2014-98
REGIONAL DISPARITIES IN PRODUCTIVITY OF SMALL
AND MEDIUM-SIZED ENTERPRISES IN THE FOOD
INDUSTRY
REGIONÁLNÍ DISPARITY V PRODUKTIVITĚ MALÝCH A
STŘEDNÍCH PODNIKŮ V POTRAVINÁŘSKÉM PRŮMYSLU
ING. MARTINA NOVOTNÁ, PH.D.
ING.TOMÁŠ VOLEK, PH.D.
ING. JIŘÍ ALINA, PH.D.
Katedra ekonomiky
Ekonomická fakulta
Jihočeská univerzita v Českých Budějovicích
Department of Economics
Faculty of Economics
University of South Bohemia
* Studentská 13, 373 63 České Budějovice, Czech Republic
E-mail: novotna@ef.jcu.cz, volek@ef.jcu.cz, jalina@ef.jcu.cz
Annotation
The paper deals with regional difference in effectiveness of production factor labour at small and
medium-sized enterprises in food industry. Labour productivity was judged in context, i. e.
considering development of other indicators as well: technical equipment of labour and capital
productivity. On the basis of relationship among indicators productivity of labour, capital and
capital-labour ratio were the food industry enterprises in monitored regions divided into 3 groups.
The regions Střední Čechy and Jihozápad were classified as economics successful. It was found that
the productivity of labour and its dynamic in particular regions has different size also development,
that's largely affected by disparity in the fieldof wages in particular regions.
Key words
labour productivity, technical equipment of labour, small and medium-sized enterprises, regions
Anotace
Příspěvek se zabývá regionálními rozdíly v účinnosti výrobního faktoru práce v malých a středních
podnicích v potravinářském průmyslu. Produktivita práce byla posuzována v kontextu vývoje
souvisejících ukazatelů: technické vybavení práce a produktivita kapitálu. Na základě vztahů mezi
těmito ukazateli byly potravinářské podniky v monitorovaných regionech rozděleny do 3 skupin.
Ekonomicky nejúspěšnější byly klasifikovány malé a střední podniky ve Středních Čechách a
Jihozápadě. Dále bylo zjištěno, že úroveň a dynamika produktivity práce je odlišná v jednotlivých
regionech a je do značné míry ovlivněna mzdovou disparitou v jednotlivých regionech.
Klíčová slova
produktivita práce, technické vybavení práce, malé a střední podniky, regiony
JEL classification: R11, D24, E23
Introduction
Labour productivity is the most frequently measured indicator of productivity. Indicator of labour
productivity shows the efficiency of utilization factors of production and the production possibility of
all economy. Labour productivity we can write as GDP per employee (Belorgey et al., 2006) or value
Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
758
added per labour (Broersma, Oosterhaven, 2007). There are two sources of labour productivity
growth: technical progress and increases in the average capital–labour (K–L) ratio (Guest, 2011).
Piacentino,Vassallo (2011) found that capital deepening seems to affect negatively labour productivity
growth. Labour productivity is influenced by many shocks. There are two types of structural shocks:
(1) technological shocks, that is changes in the technological progress which affects labour
productivity in the long-run, and (2) non technological shocks, that is all the other shocks that affect
labour productivity temporarily through its effects on capital accumulation and aggregate demand
(Travagliny, 2012). Labour productivity is also influenced by business cycle. Labour productivity is
pro-cyclical in the real business cycle model, despite the assumption of diminishing marginal returns
to labour input, because booms are periods in which technological conditions are particularly
favourable. (Bernanke,Parkinson, 1991).
Labour productivity can be measured at the corporate and regional levels. The size and dynamics of
labour productivity in the regions is one of indicators of regional competitiveness (Ramik et al. 2010).
Aglomeration (regions) may yield the positive and negative effects on the dynamics of productivity
(Antonelli et al .,2011). Several studies focus on convergence labour productivity and the hypothesis
of convergence among regions (Enflo 2010, Piacentino,Vassallo, 2011). Lopez-Bazo et al. (1999)
found a tendency to convergence in labour productivity across European regions. On the other hand
Fiaschi, Lavezzi (2007) showed that the distribution of labour productivity in European regions tends
to a bimodal distribution.
We have other types of productivity as capital productivity or total factor productivity. The capital
productivity shows how productively capital is used to generate value added. Total factor productivity
measure technological change. Total factor productivity determines labour productivity, not only
directly, but also indirectly by determining capital per worker (Prescott, Lawrence, 1997).
Methodology
The aim of this paper was to investigate regional differences in the efficiency of the production factor
labour in small and medium-sized enterprises in Division 10 - Manufacture of food products (NACE
2). The efficiency of the production factor labour (labour productivity) was assessed in context, i.e.
with regard to the development and additional indicators: technical work equipment, capital
productivity. Monitored indicators have been defined with regard to the availability and comparability
of data at the sector level as well as business data. At the sector level, labour productivity was
determined as a proportion of gross value added and compensations to employees, at the corporate
level as a quotient of value addedand in labourcosts. The substantive content of givenindicators is not
completely identical, however, the gross value added in shorter period is estimated on the basis of
value added and compensation of employees are essentially labourcosts i.e. labour costs, including
social and health insurance. Technical equipment oflabour was defined as the quotient of gross fixed
capital formation and compensation of employees, in other words, as the proportion of tangible and
intangible assets and labourcosts.
As a source of data for the reference sector was used the National Account, enterprise data were
drawn from a database of ALBERTINA holdings for 6 years (2007-2012). Data of enterprises are
surveyed at 383 companies in the Czech Republic, whose principal activity is the food industry; these
companies have been throughout the period fixed. In each year, according to the EU methodologies
(European Commission Directive (ES) No. 800/2008) were enterprises divided by size.According to
the Operational programme of industry and enterprise is considered as small and medium-sized
enterprise micro, small and medium enterprise according to EU methodology. Number of micro, small
and medium enterprises was slightly changing depending on the change in the conditions for inclusion
in the large-size classes (number of employees, turnover, balance sheet total).
Another aim of the analysis of the indicators given was to assess their development and relationships
within individual regions. The motive was to assess the proportional development between the
evolution of the volume of fixed assets C, L labour costs and the volume of value added Y. The
Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
759
relation between labour productivity, capital productivity and technical work equipment can be
written:
L
C
:
L
Y
C
Y
= ,where Y/C is the capital productivity, CP, Y/L is the labour productivity, LP
and C/L is the technical equipment of labour (capital-labour ratio, CLR).
The same relations are valid for indices of these indicators:
0
0
1
1
0
1
CLR
LP
:
CLR
LP
CP
CP
: CLRLPCP III ==
If the index of capital productivity is equal to one, it is clear that the index of labour productivity is
equal to the index of technical equipment of labour and the labour productivity grows proportionally
to technical equipment of labour. This relationship is characterized by a neutral type of technical
business development. It does not change the permanent production use, it does not change the cost
per unit of production, theenterprise achieves the effect only by expanding the production. This type
of technological development represents extensive type of production.
If CPI > 1 then LPI >
CLRI This is a saving type of technical development. The
efficacy of fixed assets increases, the volume of fixed assets in relation to the value added grows
disproportionately. There is a relative saving in fixed costs, and this is considered to be a consistently
profitable type of development.
If CPI < 1 then LPI < CLRI This is a challenging type of technical development.
Labour productivity grows slowly than the technical equipment of labour, it occurs to the lower
utilisation of production-permanent load. Costs per unit of production are growing. This can occurif
long-term assets, having a production capability, grow simultaneously with the same or faster growth
of the output of the company, such as investment in infrastructure and others. (Střeleček, Lososová,
2003).
Results and discussion
At First, attention was focused on the evaluation of the development of labour productivity in the food
industry in monitored years both at the level of the national economy (section C Manufacturing in
more detail in Section 10 –Food industry - NACE 2), and at the corporate level.
The purpose of these actions was also, among others, to verify whether the sample of enterprises is
sufficiently representative. Labour productivity index is affected not only by the output, i.e. value
added, but also by a large extent the intended inputs. Production factor labour is understood as the cost
of labour. And that’s how regional differences resulted by the different levels of average wages affect
the size of this indicator. Higher wage average level will affect inversely levels of productivity of
labour.
Fig. 1: Labour productivity in CZK (value added / labour costs)
Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
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Source: Own calculations based on the data of National accounts, database ALBERTINA
From figure 1 it is partly possible to compare the productivity expressed at the national level (share of
gross value added and compensation of employees) and at the corporate level (share of book value
added and labour costs). From a material standpoint, these indicators can be considered comparable.
The value added in the profit and loss account in enterprises engaged in the production of food
products is in large part created by differences between performance and power consumption. From
figures 1 and 2 follow that the value added of CZK 1 employee compensation or as the case may be 1
CZK labour costs rise in the very year 2009 when the Czech economy was most affected by the global
crisis. From more detailed analysis followed that the apparent contradiction is due to the fact that the
power consumption of this year fell faster than performance. It should be borne in mind that in the
value added are partly reflected the costs (output consumption), i.e. output affects not only the
exercise price of food products, but also the cost of inputs. In 2010, on the contrary performances
grew more slowly than the power consumption and thus it comes about the decline in labour
productivity calculated from value added. Exclusion of large enterprises (EU classification) didn’t
significantly affect the results of labour productivity surveyed of the company data. The obvious
difference can be observed in the last year of monitoring (2012), where both the level and dynamics of
labour productivity is higher in small and medium-sized enterprises.
The growth rates observed indicators (figure 2) show a similar development indicators monitored in
the industry and company data, even though we can observe more intensity fluctuations from the
sectoral data. If we focus on the results of the food businesses, it is particularly evident in 2012, while
labour productivity in small and medium-sized businesses is growing, for all the firms in that year
decreases (influence on drop this indicator for large enterprises, which may be affected by wage
increases for example).
Fig. 2: Growth rates of labour productivity
Source: Own calculations based on the data of National accounts, database ALBERTINA
0
0.5
1
1.5
2
2.5
2007 2008 2009 2010 2011 2012
CR- data of National accounts CR - enterprises total CR- small, medium-sized enterprises
0.8
0.85
0.9
0.95
1
1.05
1.1
1.15
1.2
2008 2009 2010 2011 2012
CR - data of National accounts CR - enterprises total CR - small, medium-sized enterprises
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Small and medium enterprises were divided according to the NUTS2 classification into the partial
administrative units in order to identify regional differences in progress of labour productivity.
In figure 3 is outlined the development of labour productivity for each region in the years 2007 -2012.
It is clear that throughout the observation period, food businesses in Střední Morava and Střední
Čechy significantly exceed the average level of labour productivity.
Fig. 3: Labour productivity according to regions
Source: Own calculations based on the database ALBERTINA
On the contrary, for the entire 6 years small and medium-sized businesses in Jihozápad and in
Moravskoslezko are moving significantly below the average. The development of this indicator is also
largely due to disparity in wages. It follows that Praha (Prague) is below average.
Fig. 4: Share of book value added in outputs (average for the period 2007-2012)
Source: Own calculations based on the database ALBERTINA
Figure 4 illustrates how much CZK of book value added is produced by one CZK of outputs. This
ratio can also be seen as an indicator of the level of advancement of business activities. It is desirable
that the 1 CZK outputs fall on the highest value added. From this perspective, we can state a
significant disparity in the regions. While enterprises in Střední Čechy have above-average labour
productivity, the share of book value added in outputs is the lowest (this share is about 88% of the
national average r for the Czech Republic (ČR) ). Enterprises located in Střední Morava, where labour
productivity is the highest, have the third best ratio of book value added in outputs.
Another question is whether companies with above-average labour productivity in the regions also
have above-average financial performance measured by indicators of profitability.
0.00
0.50
1.00
1.50
2.00
2.50
2007 2008 2009 2010 2011 2012
Praha Střední Čechy Jihozápad
Severozápad Severovýchod Jihovýchod
Střední Morava Moravskoslezsko ČR
0.31
0.28
0.26
0.25
0.23
0.22
0.20
0.19
0.00 0.05 0.10 0.15 0.20 0.25 0.30 0.35
Severozápad
Moravskoslezsko
Střední Morava
Praha
Jihozápad
Severovýchod
Jihovýchod
Střední Čechy
Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
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Tab. 1: The average rate of growth of selected financial ratios for the period 2007-2012
Labour productivity Capital labour ratio
ICLR
Capital productivity Relations
ČR 0.989 0.995 0.994 < < 1
Praha 1.011 1.073 0.942 > 1 >
Střední Čechy 1.012 0.974 1.039 1 < <
Jihozápad 1.004 0.985 1.019 1 < <
Severozápad 0.998 1.033 0.967 < < 1
Severovýchod 0.968 0.968 0.999 < < 1
Jihovýchod 0.971 0.995 0.977 < < 1
Střední Morava 0.969 0.976 0.993 < < 1
Moravskoslezsko 0.999 1.064 0.939 < < 1
Source: Own calculations based on database ALBERTINA
Based on the relationships between indicators (Tab. 1), food enterprises in the surveyed regions can be
divided:
1. Group of companies in Střední Čechy and the Severozápad could be characterized as
economically successful. On average, for these firms both factors of production are developing
positively. This variant of development is associated with the relative savings in tangible fixed
assets due to the higher productivity of capital and the relative savings in labour costs due to the
higher labour productivity. At the same time, however, there is a 5-year average decline in
technical equipment (e.g. there may be a sale of unused buildings or land). The dynamics of value
added is higher than the dynamics of labourcosts and tangible fixed assets, while the volume of
tangible fixed assets is growing more slowly than the volume of labourcosts.
2. Contrarily, group of companies in the Severovýchod, Jihovýchod and Střední Morava,
Moravskoslezsko and Severozápad could be characterized as a group with unfavourable
development of both factors of production on average in 5 years. The growth rate of labour costs
and tangible fixed assets is higher than the growth rate of value added, i.e. that the dynamics of
value added grows more slowly than the dynamics of both factors of production. In addition, on
average in enterprises in the Severovýchod, Jihovýchod and Střední Morava, the volume of
labourcosts grows than the volume of fixed assets (technical work equipment decreases too). In
companies in Moravskoslezsko and Severozápad is the development of these indicators opposite,
so technical work equipment grows.
3. The group includes only companies in Praha, where relationships between indicators indicate the
opposed development of production factors. A positive factor is the development of labour
productivity and a negative factor is the development of capital productivity. This is to some
extent linked to the increasing technical equipment of work. So the volume of fixed assets as well
as the volume of value added grows faster than the costs of employees. Of course, the growth rate
of value added is lower than the growth rate of fixed assets.
Conclusion
Introduced paper deals with regional difference in effectiveness of production factor labour at small
and medium-sized enterprises in food industry.Authors found that the development productivity of
labour at small and medium-sized enterprises in food industry is not developing in context
development economy business cycle. Different development can be observed at these enterprises in
comparison with average of Czech Republic, when small and medium sized enterprises achieve lower
variability. From the regional standpoint (NUTS 2) authors found that the all along observation (2007
– 2012) food industry enterprises in Střední Morava and Střední Čechy markedly exceed average
values of labour productivity. On the contrary small and medium sized enterprises in Jihozápad region
and in Moravskoslezko are below the average. On the basis of relationship among indicators
productivity of labour, capital and capital-labour ratio were the food industry enterprises in monitored
regions divided into on 3 groups. First group (includes enterprises in Střední Čechy and in Jihozápad)
Sborník příspěvků XVII. mezinárodní kolokvium o regionálních vědách Hustopeče 18.–20. 6. 2014
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would be characterized as economically successful with positive development of productivity of
labour and capital. Second group including enterprises in the Severovýchod, Jihovýchod and Střední
Morava, Moravskoslezsko and Severozápad regions would be conversely characterized as a group
with unfavourable development of productivity of labour and capital. Third group, that include only
enterprises in Prague, is defined with contradictory development. Productivity of labour develops
positively and productivity of capital negatively. This apparition is due to raising technical equipment
of labour. A similar finding for Prague was found by Zdenek a Střeleček (2012). Globally it is
possible to say that the productivity of labour and its dynamic in particular regions has different size
also development, that's largely affected by disparity in the field of wages in particular regions.
Regions with highest wages have - not always most effective exploitation of production factor labour
for example in Prague.
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This paper was supported by the Grant Agency of the University of South Bohemia GAJU
79/2013/S.