Productivity is a really boring word that hardly anyone understands. Many managers think it means profit, which it doesn’t. Many trade unionists think it means working harder for less, which is also rarely true. In fact, the companies with highest productivity – in banking, oil and gas – tend to have the highest-paid staff. But for most of us, the word has little meaning at all, and simply makes our eyes glaze over.
Yet it is the single most important concept driving Britain’s economic policy, and rightly so. Productivity is the amount of stuff you produce for the effort expended. Output per hour worked – or per person employed.
So managers are right to try to increase it, but they are wrong if they think they can keep trying to make people work harder for the same money.
If instead they concentrated on working smarter and more innovatively, using new technology to solve problems and get better results, then they’d be able to get more from each hour worked and so be able to offer better wages. Indeed, economists have shown that in general a person’s wage equals their productivity. If an hour of your time produces more for the company than an hour of your neighbour’s time, in a competitive market you’ll get paid more.
But it’s not just managers who need to keep an eye on productivity – it needs to be the focus of national economic policy as well. That’s because it is a mathematical truth that across the economy, if you multiply the level of employment (the number of hours worked) by the country’s productivity (output per hour), the result is the size of your economy, or your economic wealth.
With more people in work nationally than ever before, it’s harder to raise our national wealth by raising employment (although it’s rightly still the focus in some localised areas). That’s why we’re focusing on productivity, where on most measures we lag behind our major competitors and there is more room for improvement.
And the Treasury has helpfully explained to us how this is done: by developing policies that raise the ‘five drivers’ of productivity – investment, skills, innovation, competition and entrepreneurship.
All of this is good. But as a government, we are cornered by the technical nature of the language and so we are unable to explain in any meaningful way to the electorate what it is we are actually trying to achieve. It’s never a word that will win hearts and minds. The solution is to be more up-front about what we are trying to achieve.
We’re trying to make our country richer. That’s what economic policy is about. And, by happy economic truism, the way to do it is for all of us to have better-paid – or, as the economists have shown, higher – productivity – jobs.
So why not stand up and say that the focus of our economic policy is to help people get better-paid jobs? That’s the kind of language we can all understand.
In the town of Burnley that I aspire to represent, people are in work. Unemployment is very low. That’s good. But the public perception – true or not – is that the once-proud industries of cotton, coal and manufacturing have each in turn faded away to be replaced by takeaways, call centres, minicabs and supermarkets – minimum-wage jobs. Yes, we’re glad we have the minimum wage, but we’re not particularly proud to be earning it.
Let’s make our economic policy more user-friendly. Let’s tell the people of Burnley and hard-working families all over the country that Labour’s economic policy is to help them get better-paid jobs. Help them get more cash for them and their families. Explain what they need to do to get paid more, whether they are students, staff or managers and about the help this Labour government is providing to make it easier. Because that’s what raising productivity is all about and it’s time we said so.