Why is the UK's productivity so low?

Why is the UK's productivity so low? Any ideas would be appreciated! Have to write this as an exam-style response but any help would be useful.

Reply 1

Roberto12

Original post by student27839

Why is the UK's productivity so low? Any ideas would be appreciated! Have to write this as an exam-style response but any help would be useful.

Lack of natural resources
Labour is expensive in the Uk.
It is cheaper to produce in Low income countries where costs are cheaper.
The UK has many regulations in place by government which makes production processes more expensive.
The market in the UK isn't growing much anymore, not compared to markets such as Asia.

Hope this helps :smile:

Reply 2

harryleavey

Original post by student27839

Why is the UK's productivity so low? Any ideas would be appreciated! Have to write this as an exam-style response but any help would be useful.

We have some of the longest working hours among European countries. This can mean that output per worker per hour is less than it otherwise may be - workers are less productive (diminishing marginal returns).

Also, a lack of investment in key education sectors such as engineering.

In the short term, a lack of investment resulting from poor confidence can cause declining worker productivity over time.

There are non-economic explanations also. The 'friday work ethic' is something to consider when comparing labour productivity

(edited 6 years ago)

Reply 3

The Asian Tory

Too much regulation that stop productivity driven change in a company
High tax rates may inhibit profit accumulation which maybe/ could be spent on capital expenditure by business
Government may not of made up the short fall in capital expenditure that the private sector is not spending (increasing output gap)
There is a predicted 1-2% gap in the calculations produced by the ONS with respect to productivity according to the BOE
Low interest rate environment may unnecessarily be encouraging zombie companies to survive thus shifting investments away from dove companies
QE distorted the market thus investors are unable to distinguish between failing and thriving companies in the environment
Lack of resources in the country
To the contrary of another individual on this forum, a above equilibrium wage rate encourages productivity and a flexible labour market makes it cheaper to hire and fire workers than to train them
Too many lost working days by stressed employees with health problems
Lack long run productivity driving expenditure such as education
80% of British business are SME's and alot of them tend to be family run. This encourages nepotism which in aggregate reduces productivity
A higher wage/ bonus may encourage employees to work harder, more productively or smarter to achieve to exceed targets and it may not be used in the UK as an incentive widely to make any substantial difference.

(edited 6 years ago)

Reply 4

the bear

British workers are generally obese and glued to their smartphones ? they are not nimble and task-oriented like the Chinese etc.

Reply 5

Lord Samosa

We're quite a individualistic and indulgent society. Meaning that we like to focus on our own individual achievement as opposed to our team. (Which I assume affects overall productivity if we're just trying to focus on ourselves only). We are indulgent, as we value free time and focus on enjoying ourselves, we see it as important. Hence we demand and expect more free time and reasonable working hours.

On the flip side, China scores high on collectivism. Meaning they value a common goal over a personal goal. (i.e. Company success valued over their promotion). They are less indulgent (although this is changing), meaning they care less and don't demand so much free time and perks as we do.

For example, a free gym pass provided with your job would be valued more by a British worker, than it would by a Chinese worker.

https://geert-hofstede.com/united-kingdom.html This is a analysis of the UK and China's culture used mainly for international HR, but you may find it useful.

Reply 6

harryleavey

Original post by Lord Samosa

I'm not sure I agree with the China collectivism/Confucious argument.

I'd argue that promoting self interest results in greater productivity gains than communist ideals of a collective workforce. The Chinese are actually less labour productive than those in the UK.

Just having a large workforce and working for a common interest does not necessarily improve labour productivity.

Reply 7

Lord Samosa

Original post by harryleavey

You're correct. Collectivism also means that you're more "loyal" to your current group, and so collaborative work with other groups suffers as a result.

There's up and downs of either types of cultures, we naturally will prefer and view the British way of things as better.

I got my conclusion about China's collectivism from Hofstede's research (see link in my original post). But yeah, their culture is changing fast.

Reply 8

The Asian Tory

Original post by Lord Samosa

You do know that culture is marginal for productivity of workers. I understand the total productivity factor argument where optimal utillisation of tools lead to higher out put in proportion to capital. But once again, it is only marginal.

Reply 9

The Asian Tory

The first link: https://www.google.co.uk/search?q=migrant+workers+are+not+much+more+productive+than+native+workers+uni+of+bath&oq=migrant+workers+are+not+much+more+productive+than+native+workers+uni+of+bath&aqs=chrome..69i57.24030j0j4&sourceid=chrome&ie=UTF-8

Reply 10

The Asian Tory

Well my argument was about the relationship between productivity and ethnic minorities. The relationship between higher productivity and migrant labour tends to break down in the long run as migrant labour readjusts to British norms in labour. "In
short, if a longer residency in the UK improves the employment outcomes of migrants, then these migrants will no longer have an incentive to signal productivity through behaviours associated with a stronger work ethic.""As
this labour market assimilation process occurs, migrants will no longer have an incentive to signal productivity through additional effort, therefore their reliance on signalling through, for example, lower absence, will lessen."

(edited 6 years ago)

Reply 11

Ladbants

There are lots of factors that affect productivity, such as the ratio of capital to labour, regulations, technological advances, culture, income inequality and the level of specialisation.

Reply 12

The Asian Tory

To each their own I guess. Though I must reinforce that I do not reject the proposition that culture may have effect on work ethic thus their productivity potential, as I believe that it is only to the margin that culture have affects one's productivity potential. Rather I reject the notion that some cultures have complete or comparative advantage over others because it doesn't include factors such as their health care, homelessness, prosperity (quality of life/ upbringing), education, experiences and individual/unique characteristics. Must I add that excessive data mining and confirmation biases may sway data to meet one's conclusions.

(edited 6 years ago)

Reply 13

crosssafley

R u kidding me? UK is one of THE most productive countries on earth, fifth largest economy and the 60 mil inhabitants still out produce indias 1.2 billion.

Reply 14

The Asian Tory

Original post by crosssafley

R u kidding me? UK is one of THE most productive countries on earth, fifth largest economy and the 60 mil inhabitants still out produce indias 1.2 billion.

In terms of productivity, we have the second lowest productivity rate of all OECD countries bar Japan. There is a correlation between the size of the economy and productivity capacity but it is not strong nor absolute. An example of this is the China v Germany comparison, where the average Germany employee is more productive (produces more or higher quality goods and service in output per hour worked) than the Chinese worker yet in aggregate, China has a larger economy. The statistical evidence is against you... :tongue:

(edited 6 years ago)

Reply 15

Crown Tutor

UK does receive a lot of bashing when it comes to productivity in business schools and it is a valid question. Here is my take:

- We are risk averse- consequently we have a checklist for everything, some places have a checklist for a checklist. Whilst this form of Governance is the envy of many nations because if you look at our health and safety record for example we are right at the top. It does however have its downsides, it slows you do.
Example- An IT geek has built something super cool, by the time he goes through the approval at his company, somebody in China or India would have built it and released it into the market.

- Poor work life balance results in increased levels of depression and anxiety. Use medical data which shows how much time people are taking off due to stress.

Hope this helps.

Reply 16

username3515912

A secondary factor that can affect a country's productivity is its infrastructure. Amenities like effective transport links mean that products and materials can be delivered to their destination on time. This means that processes are done faster, thus increasing production levels. Country's such as Germany have better infrastructure and therefore are more productive compared to country's such as the UK.