The Productivity Puzzle. Do we understand it?

There can be much hand wringing whenever new data on the UK’s productivity levels are published.

Today’s figures released from the Office for National Statistics show that there was a fall in output per hour for a second consecutive quarter this year, despite there having been a succession of positive growth periods prior to that.

It marks the reappearance of what has come to be termed the “productivity puzzle”, a trend towards weak productivity growth that isn’t easily explainable by economists.

So, even though GDP has seen upward movement since the recession; productivity has stubbornly flatlined. The reason for that continues to perplex and worry analysts in equal measure. The Chancellor repeatedly points to UK productivity as being a big issue.

We are constantly reminded that UK productivity lags behind that of other G7 countries. Output per hour worked in the UK was 15.9 per cent below the average for the rest of the G7 advanced economies (Canada, France, Germany, Italy, Japan, and US) in 2015.

And it gets worse – the UK works longer hours than our counterparts in say, France or Germany.

In all quarters, not just at government level, the consistently frequent message is that productivity is key to economic growth so tackling it is an imperative.

But does productivity resonate with managers as a critical issue?

If you are not an economist or policymaker having to worry about national economic growth and keeping living standards from stagnating, realistically, is there much meaning to these figures?

I suspect it is considered to be too abstract a concept. Much like the figures around national debt or consumer credit debt, the figures can seem unreal and too lofty to feel any sort of any responsibility or accountability for at micro level.

Nor can they be identified with. Have you ever met anyone who has refused a new credit card on account of being concerned about national debt levels, for example?

Well, the same goes for productivity. It’s hard to imagine leaders feeling compelled to take action because the news headlines inform them the latest statistics are disappointing or because the Chancellor keeps citing it as a big concern.

Part of the problem is that it’s hard to grasp how productivity data is even arrived at. What actually is it? How can a single number meaningfully reflect all of the complexities and nuances of a vast number of different jobs in varying sectors?

How is a surgeon performing life-saving open- heart surgery on newborn babies measured as being productive or not productive? How is a writer’s output measured? On the number of words produced? Or accuracy of copy? What about a PE teacher or court judge?

There are, of course, huge chunks of the industrial sector where measures of productivity can more easily applied such as for call centre workers, or grocery pickers in supermarket ‘dark stores’.

However, applying crude measurements across an economy no longer dominated by manufacturing may not be that helpful.

If productivity isn’t an issue employers can readily identify with, an obvious consequence will be that they will do nothing to tackle it. There may even be greater lethargy in unionised sectors where changes to boost productivity may be perceived to be too costly, as a result of collective bargaining.

Perhaps the debate around productivity needs to be reframed so its relevance at workplace level or even regional level is brought much more into focus.

Maybe we need less hand wringing when it comes to international comparisons and more dialogue with employers about every day issues or problems they face that might be hampering their productivity.

Andy Cook is CEO of Marshall-James

To find out more about how Marshall-James can work with you to improve productivity, efficiency and flexibility in your organisation by transforming your employment framework, call us on 0203 021 3970 or email info@mjerl.com