Even Katy does:
Britain doesn’t need a productivity boost, but a revolution. And the stakes are high – not least because the new Government seems to have whittled down its growth agenda to practically only efficiency gains.
Having hiked taxes on employment in its first Budget, current indicators suggest that there is actually going to be a small decrease in the workforce participation rate over this parliament.
Yes, but productivity is not measured against the population but against hours worked. So, people falling out of the workforce *increases* productivity.
Had what’s left of my hair cut on Friday. Tim the owner said the increases and reduction in the threshold of National Insurance plus the increase in the minimum wage will add £25k to his costs this year. Talking to others in the industry he says the consensus is that there is going to be a reduction of around 50% in the number of new trainees taken on.
Well done Labour………….
People falling out of the workforce increases productivity yeah right. Tim’s logical absurdity reminds me of the software mantra that since every program contains at least one error and every program can be shortened by one line, the ultimate program has one line which contains an error. Or the ultimate blog post would have one line saying “people falling out of the workforce increases productivity.”
Off topic is there a generic name for Portuguese brandy?
“productivity is not measured against the population but against hours worked. So, people falling out of the workforce *increases* productivity.”
Not if the people who get sacked are the productive ones……
So a hard working boomer or Gen X drops out of the workforce and is replaced with a Woke Millennial who is the company LGBTQIAA+ convener – this increases productivity?
Maciera is cooking brandy….or morning heartstarter perhaps. Marx in French, same thing.
As to the absurdity, no, it’s a definition. Value of output divided by hours of labour input. So, it measures only hours worked, not those not worked. Because that’s what we want to measure here, what’s the output per hour worked?
Definition is (Value / Hours) = Productivity
Okay, so 2 people produce £1000 of value for 80 hours work. One is an engineer who works 40 hours and produces £1000 of value. The other is a Professor of Political Economics who produces £0 value and also works 40 hours.
Productivity = (£1000 / 80) = 12.5 in the above scenario.
Now the engineer drops out of the workforce, so our new productivity is:
(£0 / 40) = 0
That is not an increase!
@Joe Smith, While your point is clear, even a nonce at economics like me can see that the application of the definition is meant to be with large numbers/averages, not meant to singularly juxtapose Elyan Potatoes against actual contributing members to society in a 1:1 comparison.
I also feel you assigned the wrong value to said tuberous contributions. Should be some shade, probably stark shade, of negative.
@ Grikath
So, scale the numbers:
UK Productivity = ($3,588,000,000,000 / 1,054,000,000) = 3,404
Now, let’s assume that the small reduction in workforce participation is 2% and that it also reduces GDP by a corresponding amount. Now the productivity is:
(($3,588,000,000,000 * 0.98) / (1,054,000,000 * 0.98)) = 3,336
Which is a reduction in productivity.
The only way that a reduction in the number of hours worked results in an increase in productivity is if the value created remains the same (or increases).
My example above shows that this doesn’t necessarily hold true. Lots of private sector jobs replaced with public sector would also result in the same loss of productivity.
Looks like my second calculation is incorrect. Should be 3,269 but it’s still less than 3,404 in any case.
Addolff: I too had my hair cut a few weeks ago, and while the last remaining brown bits were disbursed across the floor the lady told me she’d let “the girl” go because it was getting too expensive to employ her.
Britain is being left behind as it refuses to embrace innovation and automation
We were embracing automation, but then the British government decided to embrace population replacement instead.
So, 25 years ago, if you wanted to wash your car but didn’t want to do it yourself, you paid a couple of quid at the garage and used the machine.
Now, there are hand car washes in every town and city in the land, all staffed by scummy looking foreign men who barely speak English. (Doctors and engineers, every one)
I think the problem is that the word ‘productivity’ is deemed synonymous with ‘value’; i.e. that productivity creates value. Unfortunately a huge and growing chunk of our population now actively produces anti-value. Exhibit A: Mr. Potato.
As for haircuts, yesterday I went to my favourite barbers for a long-delayed No. 2. Cypriot blokes and salt of the earth; I like them a lot and am loyal. Paid £20 plus tip for a 10-minute No. 2 that last time cost a tenner.
I have a combined bear trimmer/haircutter that I don’t use much because the Cypriots do it better but it’s time to forget vanity and think of the pension. Cypriots for special occasions only from now on.
BTW, the Cypriots are “working people”. Yes, Rachel from accounts has played a blinder.
Steve,
“So, 25 years ago, if you wanted to wash your car but didn’t want to do it yourself, you paid a couple of quid at the garage and used the machine.
Now, there are hand car washes in every town and city in the land, all staffed by scummy looking foreign men who barely speak English. (Doctors and engineers, every one)”
Why is so much Japanese consumer life automated? Because they didn’t just throw more foreign bodies at the problem. Conveyor belt sushi wasn’t created because it was fun to watch, it was to cut down on waitresses. They have vending machines everywhere because vending machines are cheaper than humans.
They’re also at the vanguard of health and care tech for this reason. Inventing ways to look after old people with less humans.
“Why is so much Japanese consumer life automated? ”
I once bought a carton of milk from Tokyo’s Harrods-equivalent. It took three staff to take my money and gift-wrap the milk. Every lift is manned. I conclude that they do things differently there.
Norman – Exhibit B: the Milibands.
Has anyone, in the history of mankind, ever said “Oh thank God, it’s a Miliband”? I bet they couldn’t even change a tyre by themselves. B-Arkers, every one.
WB – Asia in general is pulling ahead of Europe. I think Rhoda makes a good point, Japan looks to be a strange mix of ultra modern and the antique (do they still use fax machines?). But overall, Pacific Rim cities look like the future. They are still able to build things.
E.g. over the same timeframe of HS2 has been expensively going nowhere, China has laid down more new railtrack than exists in the entire United Kingdom.
Yes they still use faxes (or they did when I was working there in 2018). Both they and the Chinese seem to think it is better for people to have a menial job than unemployed. This results in overmanning in some areas and automation in others, e.g. some resturants have machines to take your cash/order and give you a ticket, which you had over to a waitress, who will go tell the chef what you want and then bring your food over to you.
One of the many problems with GDP is assigning a value to the output of sectors that don’t sell their goods, like education and health (outside the private provision of such). The ‘answer’ is just to take the cost of all the salaries. This may be fair enough for a nurse or surgeon, but as we all know Spud’s real value add is less than zero, and I suspect he’s just the tip of a very large fatberg in academia.
Japan invented and, along with China, continue to use fax machines because ‘typing’ their idiosyncratic scripts takes a lot longer than writing them.
Both they and the Chinese seem to think it is better for people to have a menial job than unemployed. This results in overmanning in some areas and automation in others
For the Japanese, social cohesion is paramount: way above the profit motive. Many – perhaps most – of those who would be unemployed in the West have menial jobs in Japan. This maintains their social status, render them largely self-supporting and keeps them economically active.
This is aided by the rule in corporations that careers end at 50 or 55; staff must retire; some may re-apply in lowly manual roles. This is not shameful. I suppose it takes a highly homogenous society top achieve this and it has its drawbacks but it works.
“ Now, let’s assume that the small reduction in workforce participation is 2% and that it also reduces GDP by a corresponding amount. Now the productivity is:”
If you’re going to lose 2% of the workforce it’s going to be the least productive 2%. In this case GDP will decrease by less than 2% and may even rise as the most productive are freed from supervising or clearing up after the least productive.
This country counts what most organisations would regard as costs – maintenance and repair functions – as contributors to GDP. Hence if you visit your GP the cost is counted as a contribution to GDP even though you’d rather not be ill and needing that maintenance in the first place.
A happy by-product is that this makes the public sector appear to be ‘productive’, i.e. contributing to wealth, when in fact it mostly consumes. Happy, happy social democrats.
No. It’s v difficult to measure the output of GPs by value. So, we don’t. The contribution of GPs to GDP is counted as the cost of having GPs. Same with civil servants etc.
@ BiND
A lot of people around 55 are exiting the workplace because they don’t want to be taxed to death. I don’t think these people are the least productive. In fact, to be self-sufficient enough to retire early, you’re likely to be one of the more productive.
But does that mean they’re counted as increasing GDP or reducing it? Obviously they’re ‘productive’, in that when you can get to see them they occasionally put you right more quickly than you might have got better yourself, but any maintenance and repair function does this.
In general we don’t much like maintenance and repair, hence UVPC window frames, cars that last longer and rust less, commercial jet engines sold on more hours on-wing, etc. etc. We try to reduce the need for maintenance and repair, not increase it.
Maintenance and repair have value because otherwise things break or die, but I fail to see how they generate wealth.
Joe,
Agreed, I was one of them nearly 10 years ago, but we were talking about a hypothetical situation.
I could have also added that shedding the least productive ie the youngest, also has medium term problems as we found in the ‘70s and ‘80s when we got in to a vicious circle of not being able to get a job because you don’t have experience and you can’t get experience without a job.
Southerner,
IBM provides with their operating systems a null program with a single line
br 14
branch to the address in register 14, which is the standard IBM called program return convention. Some programmer somewhere pointed out that the one line program was incorrect. Standard calling convention called for a condition code to be returned in register 15. so IBM agreed and updated it to
La 15,0
Br 14
@Joe Smith
Sorry – your maths is wrong. (a*0.98)/(b*0.98) = a/b and both of your calculations have the result 3404.17
@Tim Worstall – “It’s v difficult to measure the output of GPs by value”
That makes it sound like we measure the output of other people by value. We don’t. GDP measures the total cost. There is no measure of value.
For example, if I buy and eat an ice cream for £1, this adds £1 to GDP. If I buy it for 90p and sell it for £1, it also adds £1 to GDP. Only the final selling price matters. Eating it might have a value of £5 to me (i.e. in a voluntary transaction I would have been willing to pay up to £5 but didn’t need to as it was available cheaper).
If I pay £500 to a private doctor for a treatment, that adds £500 to GDP and its value is unknown (hopefully greater). If instead I get that treatment free on the NHS, and this costs the NHS £500, then it still adds £500 to GDP. This is in no sense more wrong than how the price of ice creams is counted.
@Charles
” (a*0.98)/(b*0.98) = a/b and both of your calculations have the result 3404.17″
Thanks for that, I can barely believe that nobody else pointed this out, and it had been ‘worrying’ me.
GDP is at “market prices”. Where there’s no market price that’s difficult. So, the convention is to use cost of provision. This is indeed different. Because by using cost of provision we’ve no idea how much value has been added. What is the value to the consumer if we’ve no market price? As what we’re trying to measure is value add….
And, as Tim regularly points out, GDP fails to ‘account’ for free (web) services, which clearly have a value to someone.
GDP accounts perfectly for free services because it is the total cost of things and free things are free.
People are very keen on having a measure of the total value created, but mere desire does not make it possible to calculate something which is inherently unknowable. GDP is a very poor substitute.