Friday, 5 January 2018

Upbeat news - UK productivity growth...unless you read the FT

If you want to read good news stories, check this out in the Financial Times.


Even by the standards of the #despitebrexit media this is a masterpiece. In what is quite a long and intelligent article they managed to get over the good news very quickly. In fact, they managed it in five lines before devoting the next eleven paragraphs to why in fact, everything was indeed terrible and we are all doomed, doomed I tell ya...


I have not been a fan of productivity as the obsessive measurement of it in my own industry leaves much to be desired. From obsessions with productivity come ideas like presenteesim in the office and other pointless paraphernalia of modern working life.


However, for the UK macro there are a few of truth bullets which really paint the picture:


1. The decline of the North Sea production and the easy productivity that went with it (a few people on rigs churning up billions of pounds per quarter) has been disastrous for the UK. This alone accounts for a huge chunk of the measured drop in productivity.


2. There is little retrospection in these numbers, so Financial Services are now way more unproductive than they were 10 years ago for worker output. But, um, most of the output was bullshit and the country had a huge recession, so were the original productivity measures also rubbish - almost certainly yes.


3. Mass immigration and an abundance of low wage labour has kept investment down and wages low. As a huge bonus to this we have had a cheaper cost of living and near deflation in many parts of the economy as well as near full employment - even with the immigration wave. Sadly, all this hugely lowers productivity - why invest in machines when there are people who will do the work for less.




I note the FT lightly touches on the 3rd point but only in passing and dismissively - whilst selectively quoting economists who agree with it and generally hand-wringing. Instead the above tells me we should not overly worry about productivity - the measurement is wrong, its a crap predictor and we cant do much about it anyway, so why worry.

10 comments:

Anonymous said...

Lies, damned lies, and productivity... It all depends on your point of view.

I've spent millions on equipping plant in the chase for productivity only to have to the floor cut from beneath the plant by cheap indian alternatives.

I've had high maintenance, heavily manned plant which has been extraordinary profitable. It's profit being driven by the "last man standing" philosophy of business.

The only central point to all of this was the product and whether it met a customer need closer than anyone else.

To get to this point you need skilled engineers both in terms of product and process development. If I was selling services, I'd argue the same. The common point would be the intellect and education of the people that provide the engineerings services. But as we tax knowledge whether it be the acquisition of it via Universities or the exploitation of it via Income Tax we constantly shoot ourselves in the foot as a nation.

Forget hugging a husky. Try hugging an engineer.

david morris said...

was the 3rd point slipped in deliberately to wind up EK ?

I think we should be told

James Higham said...

Productivity is a weapon for the static ians to use.

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Electro-Kevin said...

"3. Mass immigration and an abundance of low wage labour has kept investment down and wages low. As a huge bonus to this we have had a cheaper cost of living and near deflation in many parts of the economy as well as near full employment - even with the immigration wave. Sadly, all this hugely lowers productivity - why invest in machines when there are people who will do the work for less."

David - This has obviously omitted all the costs involved:

- anti terror measures with open borders
- costs to NHS of open borders
- costs to welfare (direct/indirect) through open borders

National and personal debt is the only true measure. Forget productivity.

Electro-Kevin said...

I think CU is well aware. We have a certain telepathy after all these years so I'm not wound up.

andrew said...


Productivity... dont get me started.

In the realm of software, the early days of databases and PCs.
We wrote Pensions Administration software (I can see you closing your eyes).
In the really early days we wrote programs in plain text files for platforms that were rather shaky and it took a long time say (10 days) to do a thing and there was a team of ~50 and many overheads.
Then I went somewhere else which used newer tools and relational databases/gui tools and a team of ~10 did about the same job - it took about 3 days to do a thing.
Then I moved away from software dev.
The team now is about size 12 and uses current generation tools that provides the system over the internet. It seems to take about 7 days to do a thing, but, there are much more complex rules and interfaces (to HMRC) etc.

... so can I honestly say we are more efficient than
in the late 80s
- yes - as we moved from quill pens to power tools in the 90s
in the late 90s
- no, but the job has changed.

I work in an area that has not really changed in any fundamental way in 30 years. and cannot really tell whether or not I am more efficient now than then.

In the same way, if you look at a vastly more complex system - like the financial services sector, yes, they may be less efficient than they were but the events of 2007-9 are the sort of productivity I hope does not happen again. I hope the onerous new regs prevent that happening again - but you will never be able to say
'because of $new_regs, there would have been a crash in '18, but there wasnt'.

TL;DR version

In any large complex system, never mind an economy
- measuring productivity is somewhere between hard and impossible
- ascribing some factor to a change in productivity is somewhere between very hard and impossible
- the FT should know better, sadly this sort of news - whether positive or negative - really is fake news.
Sad to see the FT is becoming more koshinbun than Oshinbun

Never mind brexit (which has not happened yet)


Anonymous said...

"why invest in machines when there are people who will do the work for less"

Why buy an expensive auto car washer when there are plenty of Kosovans with buckets? See every large Tesco for the answer.

Anonymous said...

Oh no. Theresa is reshuffling her Cabinet. Given her reverse-Midas syndrome, I fear the worst.

Electro-Kevin said...

Turning monkey turds into dog shit, anonymous.