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Why does the UK have such low productivity compared other advanced economies?

166 replies

Fifi1010 · 31/03/2023 09:37

Our economic productivity has grown 0.8 percent per year on average since 2008 compared with 2 percent before. Why is that? High productivity increases the tax receipts , money for schools and healthcare. If we don't improve productivity living standards will further decline. Where have we gone wrong? I know Brexit is a problem but this started 8 years before.

OP posts:
sst1234 · 31/03/2023 09:40

Because of part time tax credits culture. The last labour government damaged the economy hugely by introducing tax credits and subsidizing low wages. Employers have no incentive to invest in productivity and automation because they can get cheap labour subsidized by the taxpayer. This is arguably the worst policy introduced by any government in the last 25 years, because of the long term irreversible damage it has caused, making the whole country poorer.

Treacletoots · 31/03/2023 09:41

Brexit obviously has caused massive issues, but IMHO, the culture we have where working mums are squeezed out of the workplace after having kids for whatever reason (cost of childcare that apparently men think is the woman's cost, not the families, or simply to make life easy for the men folk 🤔 etc) probably isn't helpful towards productivity.

ArseInTheCoOpWindow · 31/03/2023 09:42

sst1234 · 31/03/2023 09:40

Because of part time tax credits culture. The last labour government damaged the economy hugely by introducing tax credits and subsidizing low wages. Employers have no incentive to invest in productivity and automation because they can get cheap labour subsidized by the taxpayer. This is arguably the worst policy introduced by any government in the last 25 years, because of the long term irreversible damage it has caused, making the whole country poorer.

And the government before them got rid of all industry and focused on becoming a service economy. So we produce next to nothing.

The economy was much more successful under Labour than under any Conservative government. Look at Truss😂

L1ttledrummergirl · 31/03/2023 09:56

Because the government use employment productivity as the measurement of success. Anyone who is out of employment is considered unproductive including those unable to work due to disability, unpaid carers (who save the country millions), sahp, volunteers etc.

It's insane that someone on minimum wage will be expected to place their 9 month old in childcare, paid for with childcare vouchers (tax payers), which costs more than they earn, so that they can work for minimum wage and count as productive.

sst1234 · 31/03/2023 09:57

ArseInTheCoOpWindow · 31/03/2023 09:42

And the government before them got rid of all industry and focused on becoming a service economy. So we produce next to nothing.

The economy was much more successful under Labour than under any Conservative government. Look at Truss😂

Not sure you understand how productivity works. Service industry also contributes to ‘production’.

sst1234 · 31/03/2023 09:59

L1ttledrummergirl · 31/03/2023 09:56

Because the government use employment productivity as the measurement of success. Anyone who is out of employment is considered unproductive including those unable to work due to disability, unpaid carers (who save the country millions), sahp, volunteers etc.

It's insane that someone on minimum wage will be expected to place their 9 month old in childcare, paid for with childcare vouchers (tax payers), which costs more than they earn, so that they can work for minimum wage and count as productive.

It’s not how the government uses employment productivity. It’s how it really works. The fluffy rainbows and unicorn concept of productivity that you describe is not the real world. Money doesn’t grow on trees. It can be printed for fun, but see how that turned out in the last 3 years.

Fifi1010 · 31/03/2023 10:01

L1ttledrummergirl · 31/03/2023 09:56

Because the government use employment productivity as the measurement of success. Anyone who is out of employment is considered unproductive including those unable to work due to disability, unpaid carers (who save the country millions), sahp, volunteers etc.

It's insane that someone on minimum wage will be expected to place their 9 month old in childcare, paid for with childcare vouchers (tax payers), which costs more than they earn, so that they can work for minimum wage and count as productive.

It doesn't mean just that. It's output per hour of work which hasn't grown much at all maybe because of low wages? We sadly need tax receipts to pay for public services. The governments reasoning to get mothers back into work means usually their earning power will increase quicker Vs not contributing towards nursery and they enter the workforce later. They are seeing it as an investment.

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Spendonsend · 31/03/2023 10:10

I think its presenteeism and long hours culture combined with the sort of empire building management processes that exist.

When i had my second maternity leave I went back to work part time and I became more productive for each hour worked. I wasnt lazy before but I had x amount of energy/capacity to work and concentrate and i spread it out over longer by slowingbdown, or attending unproductive meetings etc. I think most people start to flag and make mistakes after a certain number of hours. Or they take drugs.

MisschiefMaker · 31/03/2023 10:11

Why would productivity grow? We'd need to be investing in technology to increase per-hour output. However this is more expensive upfront and in this short-termist culture we prefer to rely on endlessly importing cheap labour to keep wages low - and therefore costs low. This makes the country outwardly look successful but obviously many people experience lower standards of living as a result as wages remain compressed and our infrastructure can't keep up with the growing population. The "productivity" measure gives the game away though.

ArcticSkewer · 31/03/2023 10:13

MisschiefMaker · 31/03/2023 10:11

Why would productivity grow? We'd need to be investing in technology to increase per-hour output. However this is more expensive upfront and in this short-termist culture we prefer to rely on endlessly importing cheap labour to keep wages low - and therefore costs low. This makes the country outwardly look successful but obviously many people experience lower standards of living as a result as wages remain compressed and our infrastructure can't keep up with the growing population. The "productivity" measure gives the game away though.

This is essentially the reason why.

Investment/lack of in technology.

But we'd rather blame the lazy workshy etc.

Think of it on its most basic level - a man making a chair by hand vs a machine making 20 chairs and a man operating the machinery.
Who is working harder? Who produces more chairs? Are the two connected? What's the role of technology?

Knullrufs · 31/03/2023 10:18

Low productivity has been a British problem, on and off, since the end of the Victorian era and especially since 1979.

UK working hours aren't great; they're among the longest in Europe, and this contributes to stress and burnout and other poor health outcomes which impact productivity. We're also one of the most obese nations in Europe, which has all kinds of knock-on effects on general public health.

I think another part of it is island nation mentality, although that's obviously not everything. There's a curious version of British exceptionalism that operates a kind of 'tall poppy syndrome' whereby ambition is something to be sneered at. I also think our education system is permanently on the wonk. It's been fucked about with politically too much. Other countries invest a lot more in apprenticeships and vocational training than we do and have done since the end of WW2 in particular.

In short, it's complicated.

Fifi1010 · 31/03/2023 10:21

MisschiefMaker · 31/03/2023 10:11

Why would productivity grow? We'd need to be investing in technology to increase per-hour output. However this is more expensive upfront and in this short-termist culture we prefer to rely on endlessly importing cheap labour to keep wages low - and therefore costs low. This makes the country outwardly look successful but obviously many people experience lower standards of living as a result as wages remain compressed and our infrastructure can't keep up with the growing population. The "productivity" measure gives the game away though.

This is so true short termism thinking is causing this. We rely on house prices to make the economy look good strip that back and we are getting poorer and less productive. There was a reason the UK became the richest country in the past we were the first country to industrialise and mass produce. We don't produce a lot of technology anymore.

OP posts:
Allthegoodnamesarechosen · 31/03/2023 10:23

Because we have higher employment and less automation.

Neededanewuserhandle · 31/03/2023 10:30

No long term investment - it's always about hedge fund bonuses and dividends for Sir Bufton Fucking Tufton and we have to accept it because we have too many forelock tugging race to the bottom twats.

OldTinHat · 31/03/2023 10:44

The Panorama programme aired 20/3 on iplayer explains it quite well 'Surviving the Pay Squeeze'.

cantab94 · 31/03/2023 10:45

sst1234 · 31/03/2023 09:40

Because of part time tax credits culture. The last labour government damaged the economy hugely by introducing tax credits and subsidizing low wages. Employers have no incentive to invest in productivity and automation because they can get cheap labour subsidized by the taxpayer. This is arguably the worst policy introduced by any government in the last 25 years, because of the long term irreversible damage it has caused, making the whole country poorer.

So true. I remember when they reported the introduction of tax credits on the news thinking what a stupid policy. Costs the taxpayer billions whilst encouraging employers to pay minimum wage and be subsidised whilst not improving productivity as you say.

vinividivinci · 31/03/2023 10:47

It is a very interesting question, and probably one that people with a much better understanding of economics and the international marketplace will be a**ble to answer.

However, the story that I have heard of the decline of the British economy goes something like this.

Once, after being one of the first countries to industrialise, we became the 'workshop of the world', supplying and trading goods and resources inside and outside the 'Empire'.

Then, after over-expansion, and two world wars, the country and the economy was left in a much 'weaker' position in the world.

During the sixties, and seventies, many other countries modernised and rebuilt their economies much more thoroughly and successfully than Britain. Trad union and management relationships were disastrous in this country, perhaps due to militance and the relics of an archaic class system that make overt distinctions between 'workers' and 'management'.

As others have said, primary industries (e.g. mining) and secondary industries (e.g. manufacturing) were deliberately neglected, nationalised companies were sold and 'consumerism' and the service economy were prioritised.

The apparent GDP was falsely inflated by vastly inflated property prices, and the minority of super-rich people.

Welfare systems became over-burdened and under-resourced, due to the governments (of whatever shade) no investing in industry, innovation and productivity, but instead following the tenets of 'austerity' and penalising welfare claimants. In a sense, Liz Truss with her mantra of 'Growth, growth growth!' was correct, but the question of how do we grow when we may no longer have the foundations for growth? always remained.

So, the poverty of this country is nothing new. I will not rattle any cages by mentioning leaving the EU, however, leaving the largest trading group in the world, when we have so little to offer, was not a good idea, in my opinion.

vinividivinci · 31/03/2023 10:49

Apologies for typos and errors, I am rushing a bot.

HungryMum101 · 31/03/2023 10:55

Lots of reasons, but I notice that hard work doesn’t pay like it used to. When assets make more money and are taxed less than salaries, it’s a shit show.

Sugarfree23 · 31/03/2023 10:59

We got rid of just about all industries, both heavy and light and became a service economy. You need to actually make and sell stuff to make money.

Go back 50 years, there were millions of men (usually) earning decent money in shipbuilding, steel works to serve the shipbuilding, and also motor manufacturing and lots of smaller businesses on the back of them. And thousands of men in mining.

There used to also be millions of women in light industries, electronic factories and in textiles. Those jobs are now mainly in China and places like India.

Not having a minimum wage pushed wages up, people would move to a different job for a 30p an hour more. Companies trying to retain staff would up the money. Now everyone pays the same so wages don't rise.

Phineyj · 31/03/2023 11:06

We do make things. We have a smaller manufacturing sector than comparable economies but it's not true to say we have none. Government policy on energy, trade, visas, transportation, education, housing (basically everything!) has made life hard for manufacturing though.

There are two UK specific issues to do with how productivity is measured. The financial services industry is one of the most productive industries in terms of value created. It has not recovered from 2008 and BREXIT has been a further blow. And propping up failing banks is hardly productive.

It is also harder to measure productivity in services as output is harder to quantify.

The main reasons I believe do lie in the labour market though, so previous posters have identified lots of relevant issues.

This is an accessible introduction to productivity:

www.bbc.co.uk/news/av/business-36497843

Phineyj · 31/03/2023 11:10

www.makeuk.org/insights/publications/uk-manufacturing-the-facts--2022#/

We're 9th in the world (size of manufacturing sector).

My husband lectures in manufacturing and the vast majority of the students he trains are not from the UK, which tells you some about how the sector is perceived, however.

Kpo58 · 31/03/2023 11:14

Because the government:

  • refuses to make childcare available & affordable to everyone which pushes a good % out of the workforce
  • doesn't value education (hence why we have so many funding cuts and the further education is unaffordable)
  • doesn't value the health of the nation (hence the lack of preventative healthcare, being able to catch things early and they love allowing companies to put in random chemicals for in our food)
  • doesn't like people to have a stable home, which is why they don't like investing in housing and would much rather that people have to move every year or 2 if you are renting.
  • doesn't like people to have good mental health and would much rather that people worked all hours of the day in a small cupboard at home rather than actually talk to another human. They also like making public transport unusable and unaffordable outside large city centres. They also like making moral boost entertainment such as pubs, social clubs, etc to be unviable due to high taxes, rent and building rates. Building over all green spaces is an extra bonus in their eyes.

It turns out that an sick, stressed, unhappy and poorly educated workforce isn't actually very good at working effectively. Who would have known? 🤷‍♀️

CalistoNoSolo · 31/03/2023 11:16

Lack of investment in infrastructure, R&D and education. Its really that simple.

duoplik · 31/03/2023 11:18

Never recovered from 08, QE, wage stagnation

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