In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries.
Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,”
3. Productivity
Productivity measures how much output is produced for a given input
The more efficient the economy is, the more that can be produced in a
sustainable fashion. In other words, higher productivity growth leads to a
higher long-term growth rate of the economy.
Factor Inputs
(land, labour
and capital)
Factor
Productivity
(efficiency)
Output
6. GDP per hour worked for selected countries
89.3
96.7 100
109.9
127.9 128.7
134.5
0
20
40
60
80
100
120
140
160
Japan Canada UK Italy US France Germany
Index of GDP per hour worked in 2016 (UK=100)
7. Labour productivity in the UK
70
75
80
85
90
95
100
105
1994Q1
1994Q4
1995Q3
1996Q2
1997Q1
1997Q4
1998Q3
1999Q2
2000Q1
2000Q4
2001Q3
2002Q2
2003Q1
2003Q4
2004Q3
2005Q2
2006Q1
2006Q4
2007Q3
2008Q2
2009Q1
2009Q4
2010Q3
2011Q2
2012Q1
2012Q4
2013Q3
2014Q2
2015Q1
2015Q4
2016Q3
2017Q2
Measures of Labour Productivity in the UK, Index (Q4 2007=100)
Output per hour Output per worker
10. Companies have
invested too little
Too many zombie
companies due to very
low interest rates
Low levels of research
and development
spending
Persistent and deep
skills shortages in key
industries
Relatively low levels of
market competition –
inefficient monopolies
Low real wage growth
& low worker morale
In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries.
Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,”
Productivity— or output per hour by workers — is the key driver of long-term economic growth.
The productivity gap is a phrase to describe a sustained difference in measured output per worker (or GDP per person employed) between one country and another. Productivity is a measure of the efficiency of factor inputs such as labour and capital
Labour productivity measures the output per worker in a period of time. Labour productivity is an important factor in determining the long run trend rate of economic growth; tax revenues, inflation and real wages.
This chart shows comparative UK labour productivity
Britain's relative low level of labour productivity is widely recognised as one of the UK's key structural economic weaknesses
The productivity gap means for every five days a British person is at work, a German worker only has to work four days to produce the same economic output.[3] This could be costing UK families as much as £9,000 per household every year
Since the 2007 crisis, UK labour productivity has stagnated – falling well below its pre-crisis trend.
Productivity is no higher now than it was just before the 2008 financial crisis, in stark contrast to the average annual growth of 2.1 per cent recorded during the decade before the crash. Had the pre-crisis trend persisted, productivity would now be 20 per cent higher.
Keep in mind that the fast expansion of the digital economy may mean that it is becoming harder to measure the value of output per worker in part because many consumer services are available on the web for free.