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December 1, 2023

Better productivity is good and it should be used for good work – thoughts on the National Productivity Week

As we come to the end of National Productivity Week, it is instructive to look back at what has been said in the many events that took place since Monday, with much of the emphasis on the impact of productivity growth on our incomes. For sure, if we trace wage growth and productivity per person over long periods of time, we see a good correlation between them. Higher productivity brings to the firm more revenue for each worker it employs, and so more to share between workers and capital owners. On average a similar kind of sharing has been taking place over the years, with some short-lived exceptions like the fall in labour’s share during George Osborne’s austerity policies of 2010-2016.

During Productivity Week there has also been talk about some other consequences of higher productivity, like more tax revenue and so lower debt and more money to spend on badly underfunded public services. But in this blog post, I want to focus on a neglected social objective: good work.

The benefits of higher productivity emphasised during National Productivity Week come from work. Without work, we don’t produce, and we don’t see any productivity benefits, whatever else we choose to do. Those who say we can invest heavily in new technologies and forget about work miss the point. Whatever technology we install, however intelligent it is, it is people who drive that technology forward, and people who make the decisions on how to apply it.

Listening to the many commentaries about the beneficial impact of productivity growth on our incomes, one would conclude that what workers lack most is income. This might be true for some workers, especially in these times of rising living costs. But comprehensive surveys of workers based on representative samples tell us something different: what workers want from their employers, before they mention more money, is good quality work.

I strongly believe that low incomes should be taken care of through well-designed policy support. We need to be providing good quality public services like education and health, targeting income support for essentials like housing and energy, offering a good living wage and zero taxation for those on low incomes, both on income and national insurance contributions.

Beyond that core social though, attention should then be focused on the other things that make workers unhappy at work. And they are unhappy. Surveys of workers show that - although workers desperately want work, and if they lose it they are very unhappy - the time they spend at work is not making them happy. Some professionals fare better, but the bulk of the workforce rate certain features of their work only slightly above being sick in bed or experiencing family bereavement.

If giving people more income from work when they become more productive is not the answer, what is it? Two things stick out in worker responses to questions about their wellbeing at work. The first is one that is important, although higher productivity is not the answer to achieving it. In fact, the causation is more likely to go the other way: if workers achieve it, they are likely to become more productive. What is it? Better formal and informal communication at work, between workers, their line managers and other colleagues.

Currently, seeing your boss is one of the most unpleasant things that workers can do at work. This is absurd. A worker spends time doing their job and gets to know it better than any line manager. Their contribution to improvement, getting rid of inefficiencies and suggesting ways forward, is invaluable.

Yet, that resource is too often ignored by bosses, to the extent that when they call a meeting, employees are frightened that they are being called in to hear some bad news. We know that improving communication at work motivates workers and improves productivity. The Pissarides Review into the Future of Work and Wellbeing that I am running with funding from the Nuffield Foundation published research that showed that high-engagement HR philosophies mediate far better outcomes for technology adoption. Yet, I have not heard even once during National Productivity Week any suggestion of better employee engagement as a priority. The only talk about workers was how to improve their skills, as if making someone more skilful would automatically raise company productivity.

The second improvement in the quality of work that workers usually demand is time flexibility. This takes several different forms. One is the ability to combine remote and office work. Another is to have a sympathetic boss who shows genuine understanding – for example, if family needs are better served if the worker could leave work early, or – on occasion – not come in at all. Jobs that enable a better work-life balance are much more attractive to employees than traditional nine-to-five jobs. Not all jobs can offer telepresence, and we should be mindful of this. But one simple idea is easy to implement and is gaining increased support: a shorter work week, taken as the worker prefers, with the four-day week gaining increasing support.

We know from historical data that when productivity rises, workers work fewer hours. The typical worker in Germany, the Netherlands and Denmark works far fewer hours than the typical worker in Greece, yet their earnings are far higher too. Britain is somewhere in the middle. This is telling us that when productivity rises, and more income is not our top priority, we could take more time off work without losing income.

So far, shorter work weeks have been taken through a small reduction in standard weekly hours, most likely negotiated with unions, or by the worker going part-time. Many workers say that they prefer a more formal 4-day week arrangement, and there is no better way to achieve this than through better use of the higher productivity that the many suggestions that we heard about this week might bring.

Raising productivity is clearly a worthy goal. Is it too much to ask that this should be matched by a goal to lift levels of employee happiness? I believe that it is not, which is why at the Institute for the Future of Work, which I co-founded, we have developed our Good Work Charter. Good work – work that offers dignity and autonomy, that has fair pay and conditions and where people are properly supported to develop their talents and have a sense of community – is one of the ways that productivity can be improved. As such, it should be as much of a focus as income growth and skills.


Professor Sir Christopher Pissarides


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