Low Productivity in Britain’s Workforce: A Structural Issue, Rather than “Poor Work Ethic”
As the race to become next British Prime Minister approaches the finishing line, some revealing comments from the front-runner, Ms. Liz Truss, concerning the productivity of Britain’s workforce have surfaced in the headlines, igniting a heated discussion over their apparent merits and demerits. During a private conversation, sometime during her tenure as Chief Secretary to the Treasury between 2017 and 2019, she was recorded on tape as referring to British workers as lacking the “skill and application” of foreign workers. Similar reservations over British work culture featured earlier in a book that she had co-authored, with future Cabinet colleagues, in 2012. In ‘Britannia Uncovered: Global Lessons for Growth and Prosperity’, which can be considered an ode to “business and enterprise”, Dominic Raab even classed British workers alongside the “worst idlers in the world”.
Setting aside allegations of a poor work ethic, supposedly demonstrable in a casual attitude to work and a sense of entitlement which keeps Britons out of low-paid and low-skilled jobs, there can be little denying that poor productivity has impeded Britain’s economic growth in recent decades. The UK’s productivity, as judged by some measures, is lower than that in other G7 countries, and productivity growth has significantly slowed down since the financial crisis of 2008-2009, to second slowest of the G7 between 2009 and 2019. Until the crisis, productivity had risen at around 2 per cent at year, as measured by output per worker or output per hour worked, at a rate second fastest within the G7 between 1997 and 2007.
The British “productivity puzzle”, which appears to have perplexed economists and policymakers alike, has been compounded by a “productivity gap” between the London and the South East, where a highly skilled, and high-paid, workforce is engaged in a range of knowledge-intensive, high-productivity services, in contrast to other parts of the country. London’s position as a financial centre was boosted by a wide-ranging deregulation of the financial service sector in the 1980s and 1990s, which extended to the London Stock Exchange, banks, insurance providers, financial and investment services firms, and the commodities markets.
Productivity can be considered the ultimate measure of economic success and is a driver of economic growth. It depends upon the efficient use of inputs, in the form of money (capital), labour (human capital), and physical capital (equipment, machinery, vehicles, factories and other assets used for manufacturing goods) to maximise outputs, or the amount and value of goods and services produced. Multifactorial productivity, also referred to as total factor productivity, is the efficiency with which these inputs are used in the production process.
Productivity is often measured as gross value added, or the difference between the value of goods and services produced and the cost of raw materials and other inputs used in their production, and is more generally reflected in GDP- labour productivity being calculated by diving GDP by overall number of hours worked. Productivity gains, especially in the public sector, have been frequently realised by reducing inputs, in the form of pay freezes and longer hours of work, rather than by improving outputs, and, more important, relevant outcomes, through engaging with workers by developing their skills and ensuring their wellbeing and good health. It must also be remembered, in this context, that productivity is easier to measure in manufacturing industries than in the services sector, making it more difficult to identify any growth or fall in productivity in the latter.
Improving productivity, and reducing the North-South productivity gap, will require several long-term interventions, some of which are already part of the government’s Levelling-Up agenda. Across the North of England, in the Midlands, as well as in the devolved nations of Scotland, Wales, and Northern Ireland, de-industrialisation has wreaked havoc on local economies, which were once dominated by extractive and manufacturing industries that either disappeared or went into terminal decline. The UK, unlike Germany, France, and Italy, is no longer a major mass-market car producer-to give just one example. This industrial decline was hastened by supply-side weaknesses, including underinvestment in education (STEM subjects-Science, Technology, Engineering, Mathematics), vocational training, research and development, and technological innovation (automation, artificial intelligence)- which ended many labour-intensive jobs-while a mortal blow was dealt by poor management practices and an irretrievable breakdown in relations between managers and trade unions in the 1970s, culminating in an overwhelming Thatcherite victory in the 1980s.
Anecdotes of poor attitudes to work and inefficient work practices that deliver shoddy goods and poorly responsive services, of which there are many, as depicted in consumer programmes on television, and references to a dependency subculture of work-shy Brits, mostly fail to explain Britain’s falling productivity, which is more likely to have arisen from the proliferation of low-productivity, low-value-added service jobs, flexible labour markets, and poorly managed small businesses in the foundational economy in Britain’s very own Rust Belt and other left-behind areas.
Truss may have pinned some of the blame for low productivity on British workers and their work ethic, or lack of it, but it seems clear that the bigger culprits have been successive governments of both colours, and the public and private sectors themselves, which have frequently failed to modernise by focusing on product innovation, as judged by numbers of new commercial patents, and on improving the quality of service delivery, whether constrained by limited budgets (public sector) or motivated by profit maximisation (private sector). While the British economy demands some short-term fixes for the current cost-of-living crises, nothing short of major investments in human capital (education and skills development), physical infrastructure (transport, factories, industrial hubs, housing), and IT infrastructure (digital connectivity), alongside the exploitation of new opportunities from the transition to a greener economy, can be relied upon to undo past misjudgements and then improve productivity over the coming years.
Ashis Banerjee