Return to Productivity

Why important for nations

  • National productivity is the single most important factor determining an economy’s health – nothing matters more for long-term living standards than improvements in the efficiency and effectiveness with which an economy employs and combines its capital and labour

  • And national productivity growth is the only sustainable source of improvement in the standard of living – to secure higher personal incomes, lower unemployment, more and better public services, and more investment to promote enterprise development and growth in under-developed regions, and enhanced competitiveness in world markets

  • In the G7, most employment once focussed on manufacturing which required mostly ‘brawnworkers’ but many of those jobs have since been lost

  • However, service industries there have grown rapidly, creating many more jobs than manufacturing has lost

  • In the process, many firms have become more sophisticated, offering their customers ever increasing value for which they need to employ better educated, more specialist staff – more ‘brainworkers’ – for more and better products or services, more and better marketing and sales effort, more and better information to make better decisions

  • At the same time, productivity improvement has steadily reduced many of the physical and boring tasks that people had to do whilst enabling other tasks previously thought impossible viz:

    • Labour-saving equipment now does much of the hard physical work involved in sectors such as agriculture or mining

    • Computers already complete much routine clerical work such as ledger balancing in a fraction of the old time, and much more accurately

    • Silicon chips are assembled by robots – this could never be done by humans

    • Artificial intelligence is making major inroads into traditional middle-management work

  • National wealth pies have thus grown through productivity improvement whilst national work profiles have changed radically, with the average working week reduced from over 60 hours to less than 40 in the last 100 years or so

  • The result is that, in the G7 at least, more people are now in work than ever before

  • And most would look aghast at having to do what their forefathers did to earn a living