Productivity continues to be outpaced by wage growth

Output per hour in manufacturing shrank by 1.9%. Photo: Shutterstock

The Office for National Statistics has published the latest productivity figures for the UK showing that output per hour rose only 0.1% in the third quarter of last year, compared to the same period in 2018.

Because earnings growth is outstripping output, it means the cost of labour has risen by 3.6%, leading to calls for employers to invest in skills and technology.

Gerwyn Davies, senior labour market adviser at the CIPD, the professional body for HR and people development, said: “These latest figures offer further evidence that stronger earnings growth isn’t encouraging employers to invest in higher levels of productivity.

“Political uncertainty may have cast a shadow over some UK businesses’ confidence levels and held them back from investing over the recent past.  However, with some of that uncertainty now removed, employers should be looking to improve output through greater investment in skills and technology, and not through intensifying work.”

Davies added: “The introduction of new migration restrictions alongside another generous uprating in the national living wage later this year are compelling reasons for employers to make this a priority. A failure to do this may result in job cuts in some cases.

“And while the government’s commitment to increasing investment in infrastructure is welcome, more business support is needed for small firms to help them make the right investment, particularly in how they manage and develop their staff.”

The service sector in the UK recorded an increase in output per hour of 0.1%, while manufacturing saw a 1.9% decrease. Productivity in public services fell by 0.2%.

Last month, the Royal Statistical Society crowned the estimated average annual increase of 0.3% in UK productivity in the decade since the financial crisis the “Statistic of the decade”, reflecting the significance of the unusual weakness observed since the 2008 economic downturn.

RSS executive director Hetan Shah, said: “Most people won’t have paid attention to a dull sounding number on productivity, but we think it is probably the most important UK statistic of the last decade as productivity is the single biggest key to our shared prosperity.

“There’s a strong argument to say that if the UK could lift its productivity we would be less out of sorts with ourselves as a nation, as we would have more money in our pockets and more money for government to spend on public services. With the election over, the RSS hopes that by naming 0.3% as our UK Statistic of the Decade we can draw the new government’s attention to solving this critical issue.”

Commenting on today’s ONS figures, Matt Weston, managing director of recruitment firm Robert Half UK, said: “Employers can expect to be at the receiving end of promotion and pay rise requests while top professionals will be fielding multiple job offers.

“In order to win the war for talent, employers will need to consider a flexible hiring strategy, looking at both permanent and temporary staff to bring a range of skills and experience to the team and help tackle any productivity challenges.

“The onus is also on employers to provide a competitive remuneration package that is attractive to staff. That said, employees are also receptive to other benefits such as flexible working, health and wellbeing perks and training opportunities, all of which should be considered as part of any offer to retain or attract a talented team.”

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