Why is UK output per hour so low?

antrobus

IronWolf wrote: »

Why is this a problem? Surely it keeps employment high?

Because, all other things being equal, if productivity increases then so do wages.

IronWolf

antrobus wrote: »

Because, all other things being equal, if productivity increases then so do wages.

But everything isn't equal. If I can hire 1 person to do the job of 2 then that is 1 extra person on the dole.

CLAPTON

IronWolf wrote: »

But everything isn't equal. If I can hire 1 person to do the job of 2 then that is 1 extra person on the dole.

there isn't a fixed number of jobs

but higher productivity makes us richer and so likely to spend more and so create more jobs.

antrobus

CLAPTON wrote: »

there isn't a fixed number of jobs

but higher productivity makes us richer and so likely to spend more and so create more jobs.

And if productivity is stagnant or falling then we are not made richer.

And of course, most people want to be 'richer'.:)

Generali

IronWolf wrote: »

But everything isn't equal. If I can hire 1 person to do the job of 2 then that is 1 extra person on the dole.

That's a fallacious argument though. It's the Luddite view.

If you become twice as productive you take on more people not fewer. You cut your prices so even more people can buy your product. Then the money people aren't spending on you can go on other things employing other people.

Loughton_Monkey

I dislike the concept of GDP per capita. In any mature country, this indicator is never going to change much, year on year, and when it does show a trend over a number of years, we are all confused.

There is no getting away from the fact that GDP to a country, is just like Turnover to a company. Increased turnover is 'good' except when that turnover is unprofitable.

If Rolls Royce were to make 5,000 cars a year using 1000 workers, then maybe that's £500 million turnover, perhaps £50 million profit, and £500,000 turnover per employee.

When a 'bright spark' in the office suggests they sell 'merchandise' such as expensive RR branded umbrellas, key-rings, model cars..... then they set up a successful subsidiary with 100 employees, selling £10 million of goods with a very healthy £5 million profit.

GDP has increased by 2%. Profit has increased by 10%. But Turnover per employee has dropped to £463,636, or over 7%.

Nobody would criticise this business one iota. Nobody employed in the business would be disgruntled. Shareholders would be delighted. Large gin & tonics all round.....

It's exactly the same as UK Plc.

We are all getting richer (now Gordon Brown has hung up his wealth destroying antics). Why make your own sandwiches every morning, or wash your own car? We much prefer to go to Subway or Greggs, and then get the car washed by the little Polish lads on the waste-ground behind the garage on our way home.

This is called "Market driven wealth distribution". And it's far more efficient and satisfying than "Red Ed Socialist driven wealth distribution" in which we are made poor enough to go back to making our own sandwiches and washing our own cars. The rest goes to millions of unemployed who can sit in their free houses and no longer have to make a single sandwich or wash a single car.

N1AK

Generali wrote: »

Yet when I call it a productivity puzzle it's because I'm anti-Coalition...? The last time I voted in the UK it was Tory, not that it's any of your business.

You can always rely on him for over-simplistic, and obviously incorrect analysis, so I wouldn't take it personally! Like most people who think 'common-sense' provides all the answers you need, the quality of their 'common-sense' seems suspect at best.

N1AK

Loughton_Monkey wrote: »

There is no getting away from the fact that GDP to a country, is just like Turnover to a company. Increased turnover is 'good' except when that turnover is unprofitable.

No it isn't. GDP is based on Gross Value Added (with regards to businesses) thus a company could have extremely high turnover, but without adding value (profit) it would not add to GDP.

Thus your RR example is misleading. The new merchandise business would increase the GDP per head of the workforce, which is the opposite of what you said it would do.

N1AK

IronWolf wrote: »

But everything isn't equal. If I can hire 1 person to do the job of 2 then that is 1 extra person on the dole.

Drop the minimum wage to £1 an hour, guarantee jobs picking litter for anyone who can't find a private employer, watch unemployment fall and tell me the country would be better off

That person who is on the dole, because we no longer need lamp lighters or whatever, can now go and find another job. Now we have 2 people doing the work that 3 used to do, decreasing prices and likely increasing disposable income.

There's a reason we're better off now than we were when most of the population had to work on producing food!

Cyberman60

CLAPTON wrote: »

there isn't a fixed number of jobs

but higher productivity makes us richer and so likely to spend more and so create more jobs.

Not necessarily true. Higher productivity in the main is caused by implementing automated processes such as computer/robotic systems which cost jobs.

This is precisely the reason IMO why other countries are above us in the productivity league, as those that remain in work in high productivity countries earn a higher hourly rate because they are more highly skilled whereas in the UK we have rising employment yet lower skills, lower productivity and lower average hourly rate.

It's thus a trade off of higher productivity and lower employment, or lower productivity with higher employment. The UK has the better balance IMO... :T