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| Don’t glaze over. This statistic holds the key to UK prosperity | Don’t glaze over. This statistic holds the key to UK prosperity |
| (about 4 hours later) | |
| Productivity growth has fallen to 0.3% – we’ve named it the statistic of the decade, says Hetan Shah of the Royal Statistical Society | |
| As the nation puts it feet up for Christmas after a long, hard decade what lesson should it draw? | As the nation puts it feet up for Christmas after a long, hard decade what lesson should it draw? |
| Must try harder. | Must try harder. |
| Our productivity in the past 10 years has been truly terrible. In the period before the financial crisis it was growing at around 2% each year, but in the last decade that has slumped to an average growth of 0.3% a year. | Our productivity in the past 10 years has been truly terrible. In the period before the financial crisis it was growing at around 2% each year, but in the last decade that has slumped to an average growth of 0.3% a year. |
| I can see your eyes starting to glaze over already, but bear with me. It’s the most important boring statistic that you have never heard of, which is why the Royal Statistical Society has today decided to name it the UK Statistic of the Decade. Productivity is broadly the measure of how efficiently an economy creates goods and services. It is the key to every country’s long-term prosperity, and high productivity growth means a bigger economic pie, allowing for higher wage growth and more money for public services. There’s a good argument that many of the tensions and issues we have faced in the UK in the past decade would have been eased with the prosperity that comes from more productivity growth. | I can see your eyes starting to glaze over already, but bear with me. It’s the most important boring statistic that you have never heard of, which is why the Royal Statistical Society has today decided to name it the UK Statistic of the Decade. Productivity is broadly the measure of how efficiently an economy creates goods and services. It is the key to every country’s long-term prosperity, and high productivity growth means a bigger economic pie, allowing for higher wage growth and more money for public services. There’s a good argument that many of the tensions and issues we have faced in the UK in the past decade would have been eased with the prosperity that comes from more productivity growth. |
| Unsurprisingly there was little talk about productivity during the election campaign, but looking ahead it is one of the biggest issues Boris Johnson’s government faces. There are some promising signs. The Conservatives have pledged to massively increase public investment in science and research to reach a target of 2.4% of GDP. In the long run this is the fuel of productivity growth. | Unsurprisingly there was little talk about productivity during the election campaign, but looking ahead it is one of the biggest issues Boris Johnson’s government faces. There are some promising signs. The Conservatives have pledged to massively increase public investment in science and research to reach a target of 2.4% of GDP. In the long run this is the fuel of productivity growth. |
| Part of the problem with productivity is there is no silver bullet, and many competing views on the solutions. For example, the Bank of England’s chief economist, Andy Haldane, thinks that the issue is a “long tail” of unproductive companies that are not as good as their best peers. Others have argued that in fact our most productive companies and sectors, such as banking and pharmaceuticals, have started to run out of steam. The government has recognised this is contested territory, and to its credit, through the Economic and Social Research Council, is investing £32m over five years in a new Productivity Institute to develop the policy evidence. | Part of the problem with productivity is there is no silver bullet, and many competing views on the solutions. For example, the Bank of England’s chief economist, Andy Haldane, thinks that the issue is a “long tail” of unproductive companies that are not as good as their best peers. Others have argued that in fact our most productive companies and sectors, such as banking and pharmaceuticals, have started to run out of steam. The government has recognised this is contested territory, and to its credit, through the Economic and Social Research Council, is investing £32m over five years in a new Productivity Institute to develop the policy evidence. |
| But policymakers need to act now. There are several bear traps the new government must avoid. First, it should not just default to working with sexy tech sectors, but also focus upon improving the productivity of industries such as catering, retail and care, which employ millions of low-paid workers. This will need investment in training and skills, which in turn requires putting money into the Cinderella that is further education. | But policymakers need to act now. There are several bear traps the new government must avoid. First, it should not just default to working with sexy tech sectors, but also focus upon improving the productivity of industries such as catering, retail and care, which employ millions of low-paid workers. This will need investment in training and skills, which in turn requires putting money into the Cinderella that is further education. |
| These industries also need the development of better career pathways, coupled with the automation of low-skill tasks. This could help to shift these industries from being low wage, low skill and high turnover – and would enable people who are working hard in often precarious roles to receive real wage growth. | These industries also need the development of better career pathways, coupled with the automation of low-skill tasks. This could help to shift these industries from being low wage, low skill and high turnover – and would enable people who are working hard in often precarious roles to receive real wage growth. |
| Second, the government needs to remember that the public sector makes up around a fifth of the economy, and so it’s important to improve productivity in hospitals and defence, for example, even though it can be hard to measure. The government is talking about civil service reform, but it will need new strategies to improve it that go beyond New Labour targets and coalition-style austerity. The most fruitful gains could come from two things: improving leadership, and strengthening the use of data in the public sector. | Second, the government needs to remember that the public sector makes up around a fifth of the economy, and so it’s important to improve productivity in hospitals and defence, for example, even though it can be hard to measure. The government is talking about civil service reform, but it will need new strategies to improve it that go beyond New Labour targets and coalition-style austerity. The most fruitful gains could come from two things: improving leadership, and strengthening the use of data in the public sector. |
| Local authorities such as Glasgow and Bristol are showing the way in using citizen data-powered approaches to improve their services, such as integrated social transport, and we can learn lessons from outside the UK – for example Barcelona, which is combining data use with protection of privacy. | Local authorities such as Glasgow and Bristol are showing the way in using citizen data-powered approaches to improve their services, such as integrated social transport, and we can learn lessons from outside the UK – for example Barcelona, which is combining data use with protection of privacy. |
| Finally, and most importantly, the government needs to focus interventions outside the capital and the home counties. UK productivity is one of the most geographically unequal in the OECD. Researcher Tom Forth has shown that Manchester and Birmingham are less productive than similar-sized cities in other countries, and that a key part of the explanation is weaker public transport infrastructure, especially buses. | Finally, and most importantly, the government needs to focus interventions outside the capital and the home counties. UK productivity is one of the most geographically unequal in the OECD. Researcher Tom Forth has shown that Manchester and Birmingham are less productive than similar-sized cities in other countries, and that a key part of the explanation is weaker public transport infrastructure, especially buses. |
| The government needs to invest in regional infrastructure, skills and innovation, and this needs more devolved decision-making. It would be a departure from traditional policy dictated from Westminster, but the signals are good, with mooted infrastructure spend in the Midlands and the north, and the Queen’s speech talking about giving “communities more control over how investment is spent”. The Johnson government has the opportunity to push this to establish its one-nation credentials with many of its first-time voters. But watch out for the Treasury pushing back and reverting to its default approach, getting a quick return by concentrating on London and the south-east. | The government needs to invest in regional infrastructure, skills and innovation, and this needs more devolved decision-making. It would be a departure from traditional policy dictated from Westminster, but the signals are good, with mooted infrastructure spend in the Midlands and the north, and the Queen’s speech talking about giving “communities more control over how investment is spent”. The Johnson government has the opportunity to push this to establish its one-nation credentials with many of its first-time voters. But watch out for the Treasury pushing back and reverting to its default approach, getting a quick return by concentrating on London and the south-east. |
| So enjoy an unproductive Christmas. But come the new year, the government must do what is needed to ensure we don’t have another unproductive decade. | So enjoy an unproductive Christmas. But come the new year, the government must do what is needed to ensure we don’t have another unproductive decade. |
| • Hetan Shah is executive director of the Royal Statistical Society | • Hetan Shah is executive director of the Royal Statistical Society |
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