Return to Productivity

Why important for individuals

In the middle of the last century, nearly half of G7 family expenditure went on food and clothes – today, average families spend less than 15% on such basics

Productivity improvement has not only increased incomes but also released more discretionary income to buy non-basic stuff – goods and services that people ‘like to have’ on top of those they ‘must have’

Private sector manufacturing and logistics, in particular, has had spectacular success in reducing unit costs and so unit prices of most household items whilst, at the same time, greatly improving the variety, quality and service levels offered:

    • Cars, white goods, air travel, foreign holidays, staple food or table wine versus 50 years ago – once, they were luxuries for the few – now, they’re affordable by the many
    • Marvel at how personal computers and mobile phones have vastly more power than the huge air-conditioned mainframes of the 60s, and at a fraction of the cost – in 1980 a gigabyte of hard disk space cost the equivalent of £120,000 in today’s money yet it now costs around 5 pence
    Moore’s Law – (from Gordon Moore, co-founder of Intel)

    Performance of computers per unit cost doubles every two years

     (N.B. This law was accurate over period 1965 – 2005, but since has fallen behind)                      

Private sector services have enjoyed similar successes – for example:

  • The media, where the number, reception and quality of TV and radio programmes and video recordings have improved by quantum leaps in the last 50 years
  • The telecommunications sector, where people’s access to information, music and each other has been transformed in only the last 20 years
  • The retail sector, where many of their customers can now order goods from home and have them delivered next day 


In the public sector, major successes in improving lives also abound – for example, the UK’s National Health Service has had huge success with better medicines, facilities and use of technology – as a result, it has greatly improved the average length and quality of lives of the UK population

Overall, therefore, productivity improvements have already transformed the standard of living and quality of lives of around a third of the world’s population

However, that also means there’s still a long way to go


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