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

[Fifi1010]

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.

That's the thing, we simply don't know their impact (or at least, I don't know) - how much extra revenue they raise, can that be earned through some other tax that produces less distortion, do people at the edge actually choose not to work etc?

As an example, I fell off that cliff last few years. Number of my colleagues still are. It made no difference whatsoever in our decision to work (or not), and as far as I can see, no one works any less because their marginal tax is high. We occasionally talk about money, bonus etc, but this has simply never come up.

But I don't project my own experience as universal response, claiming no one affected by the tax cares. Surely some do; some don't.

Unless there is some impact analysis, we will not know.

One thing I am certain though, this is not what caused uk productivity to stagnate for the last nearly 15 years. That is over a decade lost!

Other rich nations have their own problems, but nothing as acute as what we have in our hands and we are doing practically nothing about it. Manager decline again

Meant 'managed decline' in the last post, not 'manager decline'!

Spot on, but the optics of “giving a tax cut to high earners” means it will play badly to a lot of people.

Don’t disagree with any of that. Yes for many it doesn’t change our working patterns or decisions as we don’t get overtime, but for many it may do, and I know anecdotally it does impact many doctors for example. Hard to tell without seeing data.

and yes, of all the issues causing a long term productivity decline it’s not even near the top of the list. It does in all likelihood not help though

But I don't project my own experience as universal response, claiming no one affected by the tax cares. Surely some do; some don't.

Unless there is some impact analysis, we will not know.

To this I'd add, we'll also need to factor in the impact of inflation and fiscal drag. Those combined mean that more people are likely to be in the position where these bottlenecks become relevant. That's at every level: 100k, 40%, student loan repayments, personal allowance, in addition to anyone who has to think about top up benefits too. Whereas fiscal drag and inflation haven't really been an issue for most of the period set out by the OP.

The personal allowance, in particular, has been absolutely transformed. Even with the recent galloping inflation, the personal allowance in the 2007-8 tax year bought about 60% of what it does in 2023. That is a massive difference.

Essentially, whatever impact there might be at bottleneck points, even if it were only say 10% of people affected who reduced their work accordingly (figure pulled out of arse for illustrative purposes) that's liable to be 10% of a bigger number than it used to be.

This.

It’s been ongoing for years though. I worked in “data entry” (online loading of insurance files) in the late 80’s. Started as a temp, and could easily input 60+ files with 3 or 4 small typos. Was asked to slow down to a maximum of 35 with less than 8 typos.

Because stupid people would rather be poorer themselves than letting other people make money and get some of that money.

What?

Think about quality of life.
A common scenarios for people is work full time hit the 40% tax and pay childcare. Therefore actually the extra you earn isn't hitting your own pocket.

Or work 3 days, stay under the 40% and cut your childcare bill and have a better work life balance for your family.

I no longer have the massive childcare bill but I don't see the point in returning full-time to pay afterschool an extra 2 day and my kids to be farmed out so much for school holidays and the impact both of us working f-t would have on our quality of life.

You're correct, it's a scandal that employers expect to pay poverty wages and have the government subsidise workers costs.

I may have misread, but aren't you making broadly similar points?

All governments for decades have had to top up wages & its these very low wages that mean its cheaper to hire someone than it is to invest in R&D & automation.

But we can do it, we had a car industry that was among the most productive in Europe, Pharma & Engineering/design... we have just developed a new gen of Solar panel that is 36% more efficient than the crap made in China BUT who will be manufacturing and selling back to the UK?

Yep the Germans & that dear friends is SFA to do with Tax Credits, no matter what those on the Right would like you to believe.

Clearly the tax system is not stopping people becoming very rich, we ve trebled the number of millionaires in this country in less than 8 years and we have almost 200 billionaires here in the UK.

Also, the poor and low paid are booming too, are these stats in anyway linked?

A lot of this is structural. The UK needs to invest more in public transport, subsidised train fares, alternative travel, bicycle routes. Literally make it easier for people to get to and from work! And subsidised childcare and better cable connections for when they are there. .

She made the comment that people are stupid because they'd rather be poorer themselves than pay more tax.

So am I stupid because I don't want to work a more hours, pay a lot more in tax for a little bit more cash. Lowering quality of life for our family?

It seems to even out a bit as you close on retirement. DH started a business in the early 1990s, and it has been a roller coaster ride. Some/most early years. we took nothing at all from the company, and lived off my earnings for two or three years at a time. But now, most of our competitors have vanished or died, and we are still vital to the rudimentary engineering infrastructure so the last few years, we are the last people standing who know our boring old engineering trade inside out, and can fix customer problems. So now, our business has become a key partner to most of the high tech engineering industry, because the grunt element can never be completely eliminated. And clever, and also quite innovative, because our skills apply in most industrial settings. But my business is gone.

Ha, I just saw a thread about working hours and people working 40hour+ weeks as standard. Very few people can work that many hours and be genuinely productive. We've got a working culture of presenteeism and looking busy, sitting in meetings and not necessarily getting stuff done. Don't get me started on making things either, we don't do a lot of that anymore.