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Home Publications Blogs Beat the Press UK Finance Minister George Osborne Boasts About Negative Productivity Growth

UK Finance Minister George Osborne Boasts About Negative Productivity Growth

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Monday, 16 December 2013 21:33

That may not have been his intention, but when you boast about an economy with 30 million employed workers generating 60,000 jobs a month, with a GDP growth rate of 1.9 percent, then you're boasting about negative productivity growth. Back in the days when arithmetic mattered in economic policy, people might have pointed out that job creation of 60,000 a month implies annual employment growth of 2.4 percent. Assuming no changes in average hours worked, this means that productivity in the U.K. is shrinking at 0.5 percent annual rate. Osbourne's course will have make the UK poorer than Sub-Saharan Africa in a few hundred years.

Of course in a country with large amounts of unemployment and underemployment, like the UK, low productivity is not a bad thing. It allows people to work who would not otherwise have jobs. However it hardly seems cause for the boastful sounding column Osborne had on the WSJ op-ed page. On its current path the UK will just be passing its 2007 level of output some time next year. The IMF projects that the UK will not exceed its pre-crisis GDP on a per capita basis until 2018. In the land of sharply diminished expectations this may look like a great success, but it looks pretty pathetic to people familiar with economic data and history.

 

Note: number of job holders corrected.

Comments (4)Add Comment
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written by anonymous, December 16, 2013 9:30
30 million employed workers in UK, correct?
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written by skeptonomist, December 17, 2013 8:27
Productivity is a derivative measure which is strongly influenced by short-term hiring trends. Negative productivity growth is not necessarily bad nor is positive growth necessarily good because hiring and production are not perfectly synchronized. Productivity often spikes in later stages of a recession as workers are finally let go, and when it comes down it may be indicating that hiring is picking up again. Looking at month-to-month productivity numbers as significant in themselves is largely a waste of time - productivity is something that is informative only averaged over the long term. Look at production and employment instead.

It is Osbourne's boast of GDP growth of 1.4-1.9% that is silly (the 1.9% is only a projection) - it should be much higher in a recovery. Remember Britain's debt/GDP came down from over 230% to under 50% from 1948 to 1972, under a socializing regime with extremely high tax rates. In comparison the record of the current government is pathetic.
Another suggestion correction!
written by Mark Brucker, December 17, 2013 4:33
Osbourne's course will (((have)))? make the UK poorer than Sub-Saharan Africa in a few hundred years.
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written by Transaction Support Services, December 23, 2013 6:59
It is always done by UK.It is there all time problem.The Negative productivity is always been a comman problem & it is not necessary to boast about it like this.They also have done same about [http://nashah.com/]Transaction Support Services

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About Beat the Press

Dean Baker is co-director of the Center for Economic and Policy Research in Washington, D.C. He is the author of several books, his latest being The End of Loser Liberalism: Making Markets Progressive. Read more about Dean.

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