Productivity per worker is a counter-productive statistic. A government will generally be trying to maximise both the numerator and the denominator, as both output and the number of people in work are regarded favourably. Productivity per worker goes up if the same people produce more output or if the same output is produced by fewer people, yet only the first is economically advantageous for a whole country. If the people no longer required become economically unproductive, those remaining need to carry them until they find work again. At the level of an individual business, reducing the labour force can reduce costs and put up productivity. Therefore the productivity per worker statistic puts out conflicting signals.
The Office for National Statistics has recently published a table from OECD data putting the UK against the rest of the G7, using Purchasing Power Parity to provide comparability.
The message is that British workers are a long way behind the US in terms of unit productivity but also behind France and Italy by some distance. Germany and Canada have a small lead and only Japan reports a measure below the UK. On a scale where the UK is indexed at 100, Japan is 89, the USA 140 and the rest lie between 105 and 111. It looks like disappointing news but some adjustment is called for.
At the level of a whole economy, there is a case that workers in question are the entire labour force, whether employed or not. An economy can take satisfaction in freeing up labour resources if there is something else productive for those people to do. A sensible adjustment is to use the unemployment rate, also available from the OECD, which expresses the number unemployed as a percentage of the economically active workforce. The formula is to multiply by 1 less the rate, then to re-index. Some differences appear.
Japanese unemployment is low, reported at 4.4 per cent in 2012. That is barely half the UK and US rates and brings them up to 92 against the UK index of 100. The US is still a long way in front at 140. Italian unemployment, close to 11 per cent of the work force, sees it overtaken by Germany, but still ahead of the UK.
Author’s calculations from OECD source data.
A second table, indexing each economy so that 2007 was set at 100, shows the UK falling back to 96 per cent of its UK productivity. With an adjustment for the unemployment rate, that gets worse, falling to 93. With hours worked as the denominator, the decline has been much smaller, to 98, reflecting shorter hours and extra part-time working. Overall, if expressed per worker, leaving out the unemployed from the productivity figures masks the wasted resource of people prevented from working. It may be to the credit of the productive people still in work, but it detracts from the message that we are all in this together.
