Performance down as more workers move to less productive industry sectors
A shift in employment from sectors such as mining to food and drinks services has led to a downturn in productivity, an official study has suggested.
Since the 2008 financial crisis, productivity has barely grown at all. But new research now provides part of the answer to this puzzle.
The Office for National Statistics (ONS) suggests that it is not so much that we don’t have productive industries, it is just that more of us are working in the unproductive ones.
Productivity is the main driver of long term economic growth and higher living standards.
The study of changes in productivity before and after the credit crunch, shows that before it struck people were moving into more productive industries and productivity was growing at 2% a year on average.
But since then there has been a shift away from working in highly productive areas like mining to less productive ones like food and drinks services.
It seems too many cooks really can spoil the broth.
There was lower productivity growth in some industries as well, such as telecommunications and finance. The property sector saw a rapid growth in productivity.
However, the largest factor seems to be that far more people have found work in parts of the economy that are just not that productive.
There has also been a sharp decline in labour mobility, normally you would expect people to move from lower paid and unproductive industries to higher paid and more productive ones.
One reason for that might be that high house prices make it more difficult and less attractive to move around the country for new, better jobs.
There is also a sharp regional difference in productivity, the five best performing areas are all in London and of the top 11 only Cheshire, Eastern and North Eastern Scotland are outside London and the Home Counties.
The worst performing areas are either mainly rural or former areas of heavy industry and often both.
So Yorkshire, Shropshire and Staffordshire and Northern Ireland all do badly as does Devon; with Cornwall and the Scilly Isles the least productive area.
Companies like Geometric Engineering, which makes components for the defence industry have been improving productivity by about 10% in the last three years.
They have invested in new high tech machine tools and better training to get more out of them; for instance a new computer programme means they can be set up to make different components far faster than before.