What happened to UK productivity – the puzzle of our time?
Like many people I am really interested in the projections of the UK’s economy. My reasoning is straightforward. With growth comes more recruitment – news to the ears of someone who works in HR solutions!
But increasingly I have become concerned by the productivity puzzle – how do we ensure that our people produce more value every hour?
Let me take you back to your days as an economics undergraduate.
Productivity – the measure of how much value a worker produces every hour – is the long term motor of rising living standards. When we make more, then there is more to consume and we get richer. But when we produce less, the world is poorer and so too are the individuals in it.
And of course, productivity is a simple way to pay for wage rises. You produce more and it’s easier for your employer to pay more. You make the same, where is that pay rise going to come from? This puzzle includes recent changes to the minimum wage.
Before the crash of 2008 productivity rose at a steady annual rate of 2.2%. Governments looked at ways to increase that rate. We looked at investing in better national infrastructure, researching technological innovations and money was invested in improving the skills of the workforce. Can you remember those days, when government helped you to pay for your workforce to be better trained and skilled? But now, as we look back at 2.2%, it feels a very long way away. Since the crisis, annual productivity growth has slumped to less than half a percent.
Of course, the national living wage may become a spur to businesses to improve their productivity. They may decide to invest in new machinery or new skills. But government could choose to do that too, and I hope they will.
To me, the productivity puzzle really isn’t, and shouldn’t be, that perplexing. Making more every hour depends on a few things but perhaps the most significant is the skills of the employee. Government could and should, help employers increase and improve their skills base.
Let’s look backwards to look forwards. We’re ignoring the past and the future will pay the price.
The Beastie Boys were right – it is the Skills that pay the Bills.
David Coombes, Founder and Managing Director of Logistics Job Shop
