Tuesday, 18 December 2012

Working harder making less

One of the great mysteries of this recession is the missing jump in productivity.  Normally, after  economies have been in recession a while there is a improvement in productivity, less people producing more per head.  In this recession in the UK and other European economies there has been no uplift in productivity.  It feels like we are all working harder for less money but the figures compared to prior downturns don't bear this out. 

These charts are taken from the OBRs quarterly update


So why might this be.  Well no one really knows, it could be poor data, almost certainly to blame in part.  More likely it is the fact that higher paid jobs in financial services and in the Public Sector  (yes many Public officials have been over paid for years) have been replaced by lower paid or part time working.  Is this a bad thing probably not!  The chart below shows how the economy is re-balancing away from the public to private sectors.  This is an unusual feature of this recession normally the Government would pick up the slack and create (false) jobs to bolster the economy this time we have seen the opposite.

Another feature might be that our most productive industries have been hit hardest - financial services specifically and this is probably hurting us disproportionately.

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