Oh dear, they didn’t really say this did they?

Johnson pointed out just how woeful the productivity performance of the UK economy had been since 2008. Growth in living standards depends on improvements in productivity, which in the years leading up to the financial crisis averaged more than 2% a year. In the nine years since 2008, Johnson noted, per capita incomes had grown by 2% in total.

“That’s nine years to grow as much as it would normally grow in one.”

What’s more, the productivity growth that has been lost will never come back. That’s because the Office for Budget Responsibility believes the UK has run out of spare capacity, which means the economy cannot grow any faster without generating inflation.

Ouch. Growth into spare capacity isn’t productivity growth. That is, instead, becoming more efficient at doing something and thus a change in the capacity of the economy.

7 thoughts on “Oh dear, they didn’t really say this did they?”

  1. Quite. If anything, using up the last of your spare capacity will reduce average productivity, because the last people to be hired are the least productive.

  2. I’ve always wondered how much our high level of immigration has skewed the productivity and wage figures?

    I’d be interested to know what the figures would be just for people who were living in the UK in 2009 and still live in the UK now.

  3. Productivity growth comes mainly from investment of capital. In the U.S., businesses didn’t trust the Obama administration, so they didn’t invest.

    Time will tell if business trusts Trump & Company. Ryan’s Obamacare Lite, with Trump support, suggests Washington still doesn’t get it, and growth will continue to be slow.

    Invader labor also cuts the incentives to invest.

  4. Commentators always talk about the minimum wage as being bad for business and laugh when business people complain about it. It’s quite sad that they don’t see that it is bad for workers. Business people start demanding higher productivity or put people onto zero hour contracts. And then the commentariat moans about zero hour contracts, not realising that they are a consequence of higher wages in low margin businesses

  5. If anything, in the UK we’re seeing capital replaced with labour. Across the country I’ve seen automated car washing machines decommissioned and replaced with Romanian hand car washes. Petrol pumps used to be pay-at-pump; now they prompt you to go into the shop to be served by an immigrant. Coffee vending machines used to be widespread (in train stations, offices, hospitals, etc.); now it’s personal service at Costa, or nothing.

    In France, where low-end labour is expensive, they automate a lot more. They even have distributeurs automatique de pommes-de-terre. No wonder their productivity is higher than ours.

  6. There’s nothing mysterious here whatsoever. The combination of legally-mandated “equal opportunity” hiring practices and
    “minimum wage” laws simply removes these considerations
    (important determiners of success and “degree of”) from an entrepreneur’s purview. Whether some of the wages being received by the lowest (in productivity) workers are actually in excess of their productivity or not is immaterial: the better of the workers are being mulcted of their earned wages in order to improve those (wages) of their less-able fellows. At some point (whether constantly or not) the better-able will question
    why they need exert themselves when, with lesser exertion (and attention), they can produce at the rate of the lesser-abled. And the important thing is that these better-abled can
    SEE and UNDERSTAND what I’ve described even faster than
    it’s taken me to describe it. It’s bad for workers and it’s bad for business–only good for lawyers, union apparatchiks (and their opposing numbers in “management”).

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