If Employment Is Up, Why Is Productivity Down?

It may seem logical to assume that the more people there are in active employment, the higher the country’s rate of productivity would be. The truth of the matter seems to be on the contrary, however, with some interesting figures coming to light and raising interesting questions as to the true strength of the UK’s economy and workforce. 

Numbers on the up 

The Office for National Statistics recently released the results of their assessment into the UK labour market. There were certainly some real positives to be taken from their report, not least that employment in the second quarter of this year was at its highest since comparable records began in 1971, with unemployment conversely at its lowest since 1975. There was also good news for those concerned about the stability of work in the current climate, with the number of people employed under a controversial zero-hours contract down by 20,000 on the previous year, with more people now evidently being hired in a more reliable part-time or full-time capacity instead. 

Is it enough? 

Things quickly start looking a little less rosy once you consider the shortfall between the rise of average weekly earnings (2.1%) in comparison to the rate of inflation and the rising cost of living, however. The amount people take home after adjustments for these factors have been taken into account is what is known as ‘real wages’, and this rate was, in fact, down by 0.5% from 2016, meaning that the average person is actually worse off than they were this time last year. 

What’s more, productivity, which is measured in output per hour, was down by 0.1% in the second quarter of 2017, following a 0.5% fall in the first quarter, taking the UK’s productivity levels to less than the pre-crash days of 2007, putting us well behind several of our European counterparts, notably France and Germany.