The productivity delusion

Written by Brian Tarran on . Posted in Conference Blog

Productivity, said former Chancellor of the Exchequer George Osborne, “is what makes nations stronger, and families richer… A nation flourishes when it uses the full skills of all its people in all parts of that nation”. It is also a convenient scapegoat for politicians, according to Geoff Tily, senior economist at the Trades Union Congress (TUC), allowing them to pin the problem of low GDP growth on the supply side of the economy – the workers.

Speaking at RSS Conference in Manchester this morning, Tily argued that it is a fallacy to interpret productivity outcomes as indicating a failure of supply. Instead, weak productivity may simply reflect weakening demand.

As argued in a TUC report published last year, “the poor productivity record, in the UK and across most advanced economies, has been caused by austerity sucking demand out of economies”. Whereas in previous recessions, weakening demand led to higher levels of employment, Tily argued that, in the aftermath of the financial crisis, it was wages that suffered, rather than employment – hence Osborne’s “employment miracle”: people are still in work, but earnings have decreased.

For more on this analysis, see ‘Productivity: no puzzle about it’ and, for a more recent discussion, see ‘The productivity fallacy’.

  • Geoff Tily’s talk was titled ‘Productivity statistics and the economy’, in session 1.6 Contributed – Official Statistics: Productivity & Tax

 

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