The puzzle to persist?

According to Valentina Romei, writing in the Financial Times, the last decade  saw living standards in the UK grow at their slowest rate since the second world war

She says: “The jobs bonanza, and the economy’s performance as a whole, was undermined by weak productivity, which grew at its slowest level in 60 years”

She supports this view about the last decade by making four points

1. Per capita output was less than half the postwar level 

  • Growth in per capita output, the biggest driver of increased living standards, averaged less than half the rate of the postwar period
  • Perhaps we’re not increasing the value added (and so prices paid) per worker or hour worked – due to most growth being in low value-adding sectors such as retail


2. Uninterrupted but sluggish expansion

  • The UK enjoyed uninterrupted economic (GDP) growth
  • However, it was slow, with an annual average of 1.8%
  • This was far below the overall average of 2.4% in the 40 years to 1990


3. A decade of booming jobs

  • The UK experienced a jobs boom in the 2010s, with employment growing at the fastest rate of any of the last six decades
  • The number of hours worked also rose at the fastest rate over the same period
  • But this employment boom hid poor quality jobs and is unlikely to be sustainable


4. Productivity growth slowed to a crawl

  • The UK’s sluggish economic expansion in the 2010s was largely the result of more people being in work, rather than greater efficiency, resulting in the slowest productivity growth of any decade since the second world war
  • According to the IMF, the output per person employed in the UK grew at an annual rate of 0.6% in the 2010s, compared with 1.1% in the previous decade and more than 2% in any other post world war decade
  • Poor productivity growth undermines employers’ ability to pay their workers more, which would allow living standards to rise



Richard Davies, fellow at the London School of Economics, concludes: “The story will not change in 2020 – the most important economic puzzle of our time, the flat-lining of output per hour for over a decade, will remain the government’s key challenge”

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