Productivity
One of the problems we face when the media take up economic issues is that there is often a tendency to over simplify.
In essence, the term 'productivity is a straightforward concept: output per worker, however, this seemingly simple idea conceals a great deal of complexity.
The problem comes especially when we attempt to measure productivity and then draw comparisons over time. You should already be well aware of the problems associated with measuring national output, those are then multiplied when that is divided by the number of people in the workforce.
Lets just take one example to portray the difficulties: Recent official statistics have suggested that productivity in the UK has been falling in recent years. Technically that is probably true, but we need to have cognisance of the reasons for this before reaching judgements. There has been a massive increase in labour intensive production in the UK agricultural sector. This ceteris paribus must lead to a fall in overall productivity. But why has it happened and has it been bad for the UK economy? The availability of relatively cheap and amenable labour from the EU has enabled farmers to exploit opportunities that were simply not open to them before the opening of EU borders and the free movement of labour. By 'amenable' what I mean is that these are people willing to undertake tasks which the local labour were by and large unwilling to do.
If when we leave the EU there is a fairly immediate stop put to inward migration from EU countries, some of these enterprises will probably not survive for long and productivity may then rise, when in fact there would have been no improvement in actual productivity.
Let us be clear, generally speaking, improvements in productivity do not arise from getting the work force to work harder per se. The prime determinant of productivity is the implementation of technology, in other words, investment. The reason why the UK often falls behind its european counterparts is due to a shortfall in the level of investment.
In essence, the term 'productivity is a straightforward concept: output per worker, however, this seemingly simple idea conceals a great deal of complexity.
The problem comes especially when we attempt to measure productivity and then draw comparisons over time. You should already be well aware of the problems associated with measuring national output, those are then multiplied when that is divided by the number of people in the workforce.
Lets just take one example to portray the difficulties: Recent official statistics have suggested that productivity in the UK has been falling in recent years. Technically that is probably true, but we need to have cognisance of the reasons for this before reaching judgements. There has been a massive increase in labour intensive production in the UK agricultural sector. This ceteris paribus must lead to a fall in overall productivity. But why has it happened and has it been bad for the UK economy? The availability of relatively cheap and amenable labour from the EU has enabled farmers to exploit opportunities that were simply not open to them before the opening of EU borders and the free movement of labour. By 'amenable' what I mean is that these are people willing to undertake tasks which the local labour were by and large unwilling to do.
If when we leave the EU there is a fairly immediate stop put to inward migration from EU countries, some of these enterprises will probably not survive for long and productivity may then rise, when in fact there would have been no improvement in actual productivity.
Let us be clear, generally speaking, improvements in productivity do not arise from getting the work force to work harder per se. The prime determinant of productivity is the implementation of technology, in other words, investment. The reason why the UK often falls behind its european counterparts is due to a shortfall in the level of investment.
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