The UK Productivity Gap
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In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries. Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,”
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The UK Productivity Gap
- 1. The UK Productivity Gap A Level Macroeconomics
- 3. Productivity Productivity measures how much output is produced for a given input The more efficient the economy is, the more that can be produced in a sustainable fashion. In other words, higher productivity growth leads to a higher long-term growth rate of the economy. Factor Inputs (land, labour and capital) Factor Productivity (efficiency) Output
- 5. What is a productivity gap?
- 6. GDP per hour worked for selected countries 89.3 96.7 100 109.9 127.9 128.7 134.5 0 20 40 60 80 100 120 140 160 Japan Canada UK Italy US France Germany Index of GDP per hour worked in 2016 (UK=100)
- 7. Labour productivity in the UK 70 75 80 85 90 95 100 105 1994Q1 1994Q4 1995Q3 1996Q2 1997Q1 1997Q4 1998Q3 1999Q2 2000Q1 2000Q4 2001Q3 2002Q2 2003Q1 2003Q4 2004Q3 2005Q2 2006Q1 2006Q4 2007Q3 2008Q2 2009Q1 2009Q4 2010Q3 2011Q2 2012Q1 2012Q4 2013Q3 2014Q2 2015Q1 2015Q4 2016Q3 2017Q2 Measures of Labour Productivity in the UK, Index (Q4 2007=100) Output per hour Output per worker
- 9. What is causing the productivity gap?
- 10. Companies have invested too little Too many zombie companies due to very low interest rates Low levels of research and development spending Persistent and deep skills shortages in key industries Relatively low levels of market competition – inefficient monopolies Low real wage growth & low worker morale
- 11. The UK Productivity Gap A Level Macroeconomics
Editor's Notes
- In this short revision video, we look at the substantial productivity gap between the UK and many of the UK’s major competitor countries. Paul Krugman, the Nobel Prize-winning economist said twenty fives years ago that “Productivity isn’t everything, but in the long run it is almost everything,” Productivity— or output per hour by workers — is the key driver of long-term economic growth.
- The productivity gap is a phrase to describe a sustained difference in measured output per worker (or GDP per person employed) between one country and another. Productivity is a measure of the efficiency of factor inputs such as labour and capital
- Labour productivity measures the output per worker in a period of time. Labour productivity is an important factor in determining the long run trend rate of economic growth; tax revenues, inflation and real wages. This chart shows comparative UK labour productivity Britain's relative low level of labour productivity is widely recognised as one of the UK's key structural economic weaknesses The productivity gap means for every five days a British person is at work, a German worker only has to work four days to produce the same economic output.[3] This could be costing UK families as much as £9,000 per household every year
- Since the 2007 crisis, UK labour productivity has stagnated – falling well below its pre-crisis trend. Productivity is no higher now than it was just before the 2008 financial crisis, in stark contrast to the average annual growth of 2.1 per cent recorded during the decade before the crash. Had the pre-crisis trend persisted, productivity would now be 20 per cent higher.
- Keep in mind that the fast expansion of the digital economy may mean that it is becoming harder to measure the value of output per worker in part because many consumer services are available on the web for free.