Productivity growth puzzles economists
PRODUCTIVITY in the UK remains weak as the fierce debate continues to rage over whether it is temporary or a sign of lasting damage to the economy.
As measured by output per hour, productivity failed to grow from April to June compared with the previous three months, according to the Office for National Statistics.
It was also 0.3 per cent lower than a year earlier.
Productivity growth halted when the recession began, creating a fierce debate among economists. Some argue that it is cyclical – something that will return to pre-crisis growth rates once the recession is over.
Others are more pessimistic, arguing that it is structural – that lasting damage has been caused and previous growth rates will not be achieved without significant reform.
Research by the Bank of England suggested one cyclical reason might be that companies tried to hold on to skilled workers rather than fire and re-hire and could only do so by cutting wages and reducing workloads. They claim no one answer is likely to be correct however and a variety of factors will have to be taken into account.