Time to work smarter: the UK’s continuing productivity problem

workersHere is an interesting take on the UK’s poor recent productivity record, and possible solutions to it. According to the article, low wages, inflexible work practices and job insecurity are to blame. If this is right, then there are some win-win policies which could reverse the trend and also improve working conditions across the country.

Productivity growth is essential to the prosperity of the economy. If it does not grow, then there is no room for wages and profits, as the two main categories of income, to grow together, so as to improve the material conditions of the majority. Of course, growth needs to create jobs as well, since those without employment cannot share in rising incomes, other than through out-of-work benefits which represent incomes redistributed from those in work. Employment in the UK has grown strongly since the recession, but wages have not, so that the economic ‘pain’ due to sluggish growth has been shared more fairly, with more people in work alongside stagnant wages.

Growth in wages is vital to sustain rising consumption, both private and public, while profits are necessary to fund future investment, which helps to generate rising productivity. Thus a virtuous circle can be created, in which new investment contributes to rising productivity and incomes (profits and wages), which provide the funds for future investment and so on.

The article referred to above cites research which suggests that some of the negative aspects of labour market conditions reduce motivation and hence workplace productivity. If employers only provide the ‘stick’ rather than the ‘carrot’ to motivate employees, productivity suffers.

The solutions? Fairer pay, shorter hours, and more flexible work practices which give workers more autonomy and allow them to work from home at certain times. Not only do these appear to raise productivity but they also reduce employee stress and improve the work-life balance. Win-win indeed.

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