Why the UK’s productivity lags behind other similar economies is a puzzle. We need to know why, and do something about it, because productivity ultimately determines our standard of living. The difference is stark. The average UK employee per hour produces nearly a third less than their German and US counterparts, and around a quarter less than a worker in France.
We know that productivity can be improved in three ways:
- Better technologies and techniques
- Improve workforce skills
- Manage infrastructure and workspaces better
The UK may simply not be investing enough in these three areas and there is some empirical support for this view. According to the ONS, between 1997-2017 ‘The UK has the lowest average non-government sector investment of any G7 nation as a percentage of GDP, along with the second lowest average government sector investment as a percentage of GDP’.
There may, however, be another way to improve UK productivity. UK employees work around 300 hours per annum more than their counterparts in Germany and France. These may actually be very unproductive hours. The key to improving UK productivity might, therefore, simply be to work fewer of these unproductive hours. Many companies in the UK now use so called ‘compressed hours’ according to the annual Workplace Employment Relations Study reports. Employees are allowed to compress their hours by leaving work early, or take a day off a month, so long as they have achieved their work targets. Perpetual Guardian have recently introduced a 4 day working week with no apparent loss in productivity. So, improve UK productivity by working fewer hours may be part of the solution. A shorter working week will not, however, raise living standards as there will be no increase in output. For that we do need more investment.