Showing posts from November, 2017

Productivity and Employment: A Cautionary Tale

Ah, productivity. Who knew that our whole prosperity was totally dependent on a concept as nebulous as this? To be sure, it doesn't sound nebulous. It is output per worker per hour. What is so difficult about that? The problem is how you define "output". Usually, we take this to mean GDP (gross domestic product), though we might use GNP (gross national product) or GVA (gross value added). In this post, I shall use GDP. As Diane Coyle has engagingly written , GDP is a deeply flawed measure. Yet we are obsessed with it. The Eurozone uses government debt-to-GDP and deficit-to-GDP ratios to justify harsh spending cuts and tax rises. In the UK, "WE MUST PAY DOWN THE DEBT!" roar the headlines, entirely missing the point that debt-to-GDP is a ratio, so even if we never borrowed another penny, it would rise if GDP fell. Even if GDP growth remained positive, but slowed down - say to 1.5% per annum instead of the predicted 2% -  debt-to-GDP would take longer to r

The Amazing Conversion of Sir James Dyson

“Will you tell me how long you have loved him?” asks Jane Bennet, on receiving the astonishing news that her sister Elizabeth is to marry Darcy, the rich aristocrat she used to hate. “It has been coming on so gradually, that I hardly know when it began,” replies Elizabeth. “But I believe I must date it from my first seeing his beautiful grounds at Pemberley.” This is from the end of Jane Austen’s Pride and Prejudice . Austen is lampooning the British 19 th century marriage market, in which women (and men) pretended to “fall in love” when in fact they were marrying for money. But for cynics like me, such a remarkable conversion has echoes in the 21 st century. When someone suddenly becomes an ardent supporter of an ideology they had previously - equally ardently - opposed, always follow the money . So, to Sir James Dyson, inventor of cyclone-technology vacuum cleaners and ardent Brexiteer. Sir James is frequently heard expounding his hardline Brexit views on the BBC, which is

More on productivity

The ONS's latest flash productivity estimate is rather good. Productivity in Quarter 3 2017 was up by 0.9% on the previous quarter. Here's what ONS has to say about it: Output per hour growth in Quarter 3 2017 was the result of a 0.4% increase in gross value added (GVA) (using the preliminary gross domestic product (GDP) estimate) accompanied by a 0.5% fall in total hours worked (using the latest Labour Force Survey data). This fall in total hours was driven primarily by a 0.5% fall in average hours per worker. Yes, yes, I know - economics jargon. Let me translate. ONS in plain English: People are working fewer hours, but they are producing more every hour.  Of course, this should be set against the backdrop of persistently low productivity since the 2008 financial crisis. Productivity has taken nearly a decade to return to its pre-crisis level: The ONS says that productivity has been weak because the labour market has been relatively strong during this time: Both