Five reasons the UK has bad productivity

Published by Dan Goldstraw on

It has seemed recently, ten years after the financial crash, like the economy is finally turning around…a bit. Employment is up, and productivity recently jumped upwards at the fastest rate in six years. Productivity; that is, the amount we produce as a nation for the amount of work we put in, needs to be continually going up for people’s living standards to improve. If you don’t have rising productivity then the only way people’s wages can go up is if they work more hours.

On the face of it then, this is good news. However, while productivity may have gone up compared to how it’s been over the past decade, it’s still way below what it was before 2008. Before the crash, growing productivity allowed each successive generation to be outperforming their parents. The lack of any rise in productivity since 2008 however has meant that the millennial generation has not had this. For the first time since the Second World War, young people are actually worse off than their parents, rather than better. What’s more, while all the G7 countries experienced slower productivity growth after the crash, Britain has been the worst.

Britain’s rate of productivity over the past ten years has been the worst since modern records began and, according to the Independent, the slowest even since way back in the 1820s, when the country was still recovering from the Napoleonic Wars. This is one of the key reasons living standards have gone downwards dramatically in recent years, as people have to work more in order to make ends meet.

What’s happening then? Why are other countries like Germany doing so well? If we were as productive as them, we could all take Fridays off and still not be making any less? Unsurprisingly, this is something that has attracted huge debate over the past decade, and it seems everyone has their own ideas about why…

Technology and Infrastructure

One of the most obvious differences between us and other countries is that we don’t put nearly as much into our technology and infrastructure. In Germany there is a real emphasis on pushing science and technology with 1,034 R&D Staff for every 100,000 people, whereas in the UK the number’s 883. And anyone who travels a lot by train knows how much of a shambles they can be.

Economic Environment

The centre-right think tank Policy Exchange have argued that one of the key differences between Britain and other G7 countries is our economic environment, arguing that too much debt and deficits have pulled back the economy. They’ve also argued that the internet and digital technologies have helped create a new ‘winner takes all’ environment. Jonathan Dupont points out that once the world economy has one Google, or Facebook, there’s very little scope for a second company to be doing the same thing, and so other competitors lose out.

Lack of training and education

Others however have argued that this emphasis on big technological sectors and the digital world is half the problem. Dave Innes, at the Joseph Rowntree Foundation, argues that there’s too much focus on these expensive high-tech areas, which often means neglecting the sorts of jobs and industries most ordinary people work in. As much as people talk about the need for new technologies and developments, a big chunk of the British workforce is employed in low-wage low productivity sectors such as hospitality or retail; which are much more orientated towards stuff like customer service than they are producing goods or exports. Dave argues that businesses aren’t using workers to their full potential by not sufficiently investing in training and education. There has been a massive increase in the numbers of people working low skill jobs in recent years. Businesses don’t put the time and the resources into making sure they have workers who can do more than the minimum required, nor are they offering jobs that allow for long term careers. There’s also a large section of the workforce who are completely unable to move on to more advanced kinds of work due to a lack of basic education, with five million individuals lacking basic literacy and numeracy skills.

Mental Health

As well as putting money and time into proper training, there is a real need to make sure that jobs do actually pay. Employment might have gone up in recent years, but when it’s all zero-hour contracts or other positions that fail to offer any opportunity to progress out of low pay, it’s not likely things are going to be particularly productive. It goes without saying that when people are stressed and overworked, and are stuck trying to balance more than one job just to pay rent and get by, they probably aren’t going to be the most efficient workers. There’s been lots reported about how much of a crisis mental health is currently. Job insecurity is a massive factor in this, and there’s a clear impact on overall productivity. As much as 62% of people have taken days off for mental health issues, and 43% say they’ve had to deal with mental health issues but have come into work anyway.

Morale

In much the same vein, morale is often an issue. In low skilled jobs, apathy about the work being fulfilled is not likely to produce an efficient, productive output. Poor morale may well be a contributor to the mental health crisis, as are the issues with infrastructure and in-work poverty.

Most of these reasons make sense, and it seems that actually, all of them have helped contribute to the current situation. Obviously, this makes it a bit difficult to come up with an effective solution. On the one hand, there’s some saying we need to just sit tight and wait for technology to improve until it matches that in other countries. On the other hand, there’s those like Dave who don’t think this will help in the long run as you’ll still have most of the workforce stuck in less productive areas.

This concern about reducing the number of workers with no specific skill sets is probably the issue on which there is the broadest agreement across the political divide. It’s something that’s been a problem ever since de-industrialisation, but it’s become a much bigger deal in the age of zero-hour contracts. There is no thought that the worker on a zero-hour contract will advance to a higher capacity than where they already are, and there’s therefore no real incentive to help them improve or gain further skills.

It seems then that we need to be putting investment into new technologies and developments, but at the same time, businesses need to be making sure they invest in helping their workers improve, if they are to be at their most productive. It’s also clear the problems of in-work poverty and the mental health crises are just as harmful to economic performance as they are the wellbeing of workers themselves. In Germany, average working hours have on the whole decreased since the 1990s, whilst ours have remained much the same. There is also a much greater level of worker involvement in the running of companies, as well as greater separation between work life and people’s free time. It’s also interesting to note that the recent increase in productivity here in Britain occurred after the raising of the minimum wage. Maybe, just maybe, workers who aren’t underpaid, overworked and overstressed, might actually be more productive?


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