For all the good news about the UK’s recovery, economists have long been scratching their heads about Britain’s ‘productivity puzzle’.
Latest figures from the Office for National Statistics show there was no pick up in labour productivity in the last three months of the year, despite jobs being generated at a healthy clip.
But this is nothing new; productivity – a measure of what we produce for every hour we work – has been flagging since the recession. According to the head of the government’s fiscal watchdog, weak productivity growth represents the “biggest risk” to the UK economy getting back on a stable footing.
So what do economists mean when they talk about productivity, and how does it impact our standard of living?
So what does it all mean?
Both the Office for Budget Responsibility and the Bank of England still expect productivity to improve as the economic recovery takes hold.
The Bank cites developments such as a tendency for companies to switch their workers into more productive areas and improving credit conditions as potentially bringing about “rapid improvements in measured productivity” in the medium-term.
Figures on business investment also provide reasons to be hopeful. There is evidence that companies are beginning to increase their spending on things like research and development, which should help them bring new goods and services to the market.
Source The Telegraph
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