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What is Productivity ?

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scotview
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What is Productivity ?

#99424

Postby scotview » November 28th, 2017, 7:15 am

I've noticed a lot of references lately to improving the UK's "Productivity". It seems to be core to the future prosperity of our country.

There are a lot of initiatives and tons of cash going to be thrown at improving "productivity".

I would be obliged to get your definition of what "productivity" means to you and do you think the government's initiatives/interventions are going to improve it.

Thanks

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Re: What is Productivity ?

#99494

Postby TonyB » November 28th, 2017, 10:59 am

There are many different measures and types of productivity but I think the widely publicised and discussed version relates to labour productivity and is the difference between national/sector/business output value less input costs divided by some measure of worker input eg worker hours.

I can remember in the past (70s/80s) some productivity measures being bandied about around no of cars produced by French/German/Japanese vs British workers. Some of this interpreted at the time as being a result of restrictive practices or government subsidy or lack of capital investment (depending on your political view). I've always thought that notwithstanding some possible cultural issues, all workers are equally capable of equivalent output.

One area where successive governments have focused on is training for workers, through a range of initiatives not least the rapid expansion of universities. The view being that better trained workers will inevitably be more productive, which I don't necessarily think automatically follows.

Productivity is clearly a very complex area that governments have been unable to influence positively and may be adversely influenced by other policies, for instance the labour market reforms may have led to a lack of capital investment that substitutes for labour.

Productivity is a complex issue and simple interpretations of labour productivity don't necessarily help us move forward particularly at a national policy level.

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Re: What is Productivity ?

#99504

Postby GoSeigen » November 28th, 2017, 11:23 am

scotview wrote:[...] do you think the government's initiatives/interventions are going to improve it.

Thanks


Not this Tory government. They and their supporters have a pathological belief that governments can do nothing productive and will only take action when the private sector's inaction forces them to. (A Tory MP told me this in as many words some days ago.)

Sadly, because of current regime's incompetence and sclerocis, by the time the next lot get in their ideas will be so loony and they'll have such carte blanche that they will go far beyond what is sensible.

That's UK politics...


GS

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Re: What is Productivity ?

#99517

Postby brightncheerful » November 28th, 2017, 12:06 pm

As I understand 'productivity' is what I should be doing instead of contributing to this thread.

More seriously, I define it as design (efficiency). Anything that causes the design to become inefficient is unproductive. For example, we (Mrs BnC and myself) shop at Waitrose and for the last few months have been buying on-line and having our orders delivered. Every few weeks, we buy between 8 and 10 cases of bottled water, according to our requirements, Two weeks ago having ordered 9 cases they were duly delivered. Except that we were charged for 90 cases. We (not Waitrose please note) having discovered the mistake, contacted W and the matter was sorted. But not quite. W's email confirmation for the refund said the amount (some £340) would be refunded to my credit card within 5 days. The cut-off date for my payment of the c/c balance would've fallen within that period and there was no way I was going to fork out some £340 to avoid interest so Mrs Bnc contacted W only to be told that's their system. So i contacted W and the person I spoke to said he try and arrange for immediate repayment and would call me later that day to let me know what had been done. He didn't. My plan B would've been to have not paid the £340 or so then contacted the credit card company (which is c/o John Lewis/ Waitrose) to assert the interest must be waived. From my payment record, the c/card co would know I clear my balance monthly. In the event, the cut off date was a few days before so hopefully both the debit and credit will be during the same period.

As well as Mrs Bnc's time expended, I wasted about an hour that morning trying to get the matter sorted. And it wasn't the only mistake in that order: we'd bought quantity 7 of a product but the W picker had keyed in 7 before realising W only had 3 in stock. So only 3 were delivered but we were charged for 7. That too had to be sorted out.

Conclusion: W wasted our time in having to sort out their mistake and I wasted W's time in asking them to sort out refund immediately when it wasn't necessary. On an individual level one gets used to others' ineptitude but the cumulative impact of millions of mistakes every moment of every day from badly or poorly designed system, hold-ups such as traffic jams, results in low productivity.

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Re: What is Productivity ?

#99571

Postby GrandOiseau » November 28th, 2017, 2:47 pm


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Re: What is Productivity ?

#99716

Postby gryffron » November 28th, 2017, 9:22 pm

It seems to me to be a very complicated measurement, with even more complex drivers. But in truth more closely related to cost of living than anything else. If you clean windows in Namibia, your productivity will be much less than a window cleaner in Monaco. So to a certain extent, productivity merely reflects cost of living. It is an outcome, not a cause.

Ideas from GO's link:
Education drives productivity: Nice idea. Except it doesn't. There is lousy correlation between educational standards and productivity. And even less between educational spending and productivity. USA for example has phenomenal productivity and by all comparative measures, lousy, expensive education.

France has very high unemployment and high productivity: Maybe the solution is to sack all the unproductive people and put them on the dole. From a social perspective I don't like that plan very much. Workers, even unproductive ones, tend to be much more engaged in society and less inclined to crime and anti-social behaviour. And anyway, it's only FAIR that they do some work for their money.

Uneducated immigrant workers: Sounds plausible. But Germany has just taken in a million plus uneducated arabs and German productivity doesn't seem to be suffering(??)

My thought:
A huge number of Brits are employed or self employed in part time jobs of negligible profitability or benefit to anyone. This is largely a feature of successive governments doing ANYTHING to get them off the unemployment figures. Which has been very successful in reducing headline unemployment, but has driven them to other things instead. And it affects productivity.
If you are on disability - you're not unemployed. Great so the government(s) would much rather have a disabled person than an unemployed one. Hence the huge increase in people receiving disability benefits. Don't think this affects productivity though.
If you work 16 hours, or are "self employed" trading used bus tickets on ebay, then you're not unemployed. No benefits cap for people in these categories! This definitely DOES affect productivity. You don't have to do anything useful, or even make any money to qualify as self-employed. You just need to call yourself self-employed, and hey-presto, no benefits cap!

So I think our benefits system is a big driver of low productivity. Indeed, it is actually designed to be so. Or rather, it is so targeted at reducing "unemployment" (at any cost) that the knock on has significant effect on productivity. Funny you never hear leftie journos suggesting that.

Gryff

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Re: What is Productivity ?

#99803

Postby Nimrod103 » November 29th, 2017, 8:49 am

gryffron wrote:If you work 16 hours, or are "self employed" trading used bus tickets on ebay, then you're not unemployed. No benefits cap for people in these categories! This definitely DOES affect productivity. You don't have to do anything useful, or even make any money to qualify as self-employed. You just need to call yourself self-employed, and hey-presto, no benefits cap!

So I think our benefits system is a big driver of low productivity. Indeed, it is actually designed to be so. Or rather, it is so targeted at reducing "unemployment" (at any cost) that the knock on has significant effect on productivity. Funny you never hear leftie journos suggesting that.

Gryff


I think you are absolutely right. It is interesting that the productivity graph starts to flatten off in c.2008, at the same time there is a major upturn on the number of self -employed (http://touchstoneblog.org.uk/2016/04/em ... s-problem/. or for another graph showing much the same - https://www.crunch.co.uk/knowledge/expe ... in-the-uk/).

It is one of the reasons I think measuring and getting worried about productivity is one those silly things which statisticians do because they cannot see the wood for the trees. IMHO better measures of the economic performance are things like the deficit, or tax raised.

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Re: What is Productivity ?

#99809

Postby redsturgeon » November 29th, 2017, 9:02 am

So statistics show that the average value added per hour by a UK works is £18.64 making us 16th in the world.
http://uk.businessinsider.com/expert-ma ... -nations-1

To get this figure for my own company should I divide the total sales of my own company by employee/director hours worked or is it profit gross divided by hours?

Either method brings in the issue that as we increase our sales and need to employ admin staff to help with the day to day business thn our productivity goes down, even though we are providing useful employment and growth.

John

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Re: What is Productivity ?

#99821

Postby Nimrod103 » November 29th, 2017, 9:23 am

redsturgeon wrote:So statistics show that the average value added per hour by a UK works is £18.64 making us 16th in the world.
http://uk.businessinsider.com/expert-ma ... -nations-1

To get this figure for my own company should I divide the total sales of my own company by employee/director hours worked or is it profit gross divided by hours?

Either method brings in the issue that as we increase our sales and need to employ admin staff to help with the day to day business thn our productivity goes down, even though we are providing useful employment and growth.

John


I am no expert, but since productivity growth is defined as the ratio of total outputs to total inputs, presumably you have to measure total output as gross turnover. I presume labour productivity growth is total output relative to hours worked, and you cannot use profit, as that is already a ratio of income to costs.
AIUI productivity is not like profit. Productivity goes up as more people work at more rewarding jobs, which they get by being better trained, better equipped and/or better motivated. More bankers, engineers and brain surgeons, and fewer barbers, nail groomers and delivery drivers.

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Re: What is Productivity ?

#99845

Postby vrdiver » November 29th, 2017, 10:16 am

Nimrod103 wrote:I am no expert, but since productivity growth is defined as the ratio of total outputs to total inputs, presumably you have to measure total output as gross turnover. I presume labour productivity growth is total output relative to hours worked, and you cannot use profit, as that is already a ratio of income to costs.

(my bold)

So if I leave the lights and the heating on in an unoccupied building, national productivity goes up?

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Re: What is Productivity ?

#99867

Postby Nimrod103 » November 29th, 2017, 11:23 am

vrdiver wrote:
Nimrod103 wrote:I am no expert, but since productivity growth is defined as the ratio of total outputs to total inputs, presumably you have to measure total output as gross turnover. I presume labour productivity growth is total output relative to hours worked, and you cannot use profit, as that is already a ratio of income to costs.

(my bold)

So if I leave the lights and the heating on in an unoccupied building, national productivity goes up?


If the power company produces and sells more electricity, with the same number of employees, I guess their productivity goes up. If power workers are more productive than average workers, then the national productivity goes up.

But if you are the one paying the power bill, perhaps your productivity will go down as you have used a larger input to produce your output.

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Re: What is Productivity ?

#100214

Postby vrdiver » November 30th, 2017, 2:10 pm

Nimrod103 wrote:
vrdiver wrote:
Nimrod103 wrote:I am no expert, but since productivity growth is defined as the ratio of total outputs to total inputs, presumably you have to measure total output as gross turnover. I presume labour productivity growth is total output relative to hours worked, and you cannot use profit, as that is already a ratio of income to costs.

(my bold)

So if I leave the lights and the heating on in an unoccupied building, national productivity goes up?


If the power company produces and sells more electricity, with the same number of employees, I guess their productivity goes up. If power workers are more productive than average workers, then the national productivity goes up.

But if you are the one paying the power bill, perhaps your productivity will go down as you have used a larger input to produce your output.


But if I had zero productivity in the first place (i.e. I am a consumer) then productivity has gone up (at the national level).

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Re: What is Productivity ?

#100310

Postby Nimrod103 » November 30th, 2017, 6:25 pm

vrdiver wrote:
Nimrod103 wrote:
vrdiver wrote:(my bold)

So if I leave the lights and the heating on in an unoccupied building, national productivity goes up?


If the power company produces and sells more electricity, with the same number of employees, I guess their productivity goes up. If power workers are more productive than average workers, then the national productivity goes up.

But if you are the one paying the power bill, perhaps your productivity will go down as you have used a larger input to produce your output.


But if I had zero productivity in the first place (i.e. I am a consumer) then productivity has gone up (at the national level).


If you had zero productivity, would you be able to buy electricity? You could collect sticks, maybe.

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Re: What is Productivity ?

#100332

Postby vrdiver » November 30th, 2017, 8:42 pm

Nimrod103 wrote:
vrdiver wrote:
Nimrod103 wrote:
If the power company produces and sells more electricity, with the same number of employees, I guess their productivity goes up. If power workers are more productive than average workers, then the national productivity goes up.

But if you are the one paying the power bill, perhaps your productivity will go down as you have used a larger input to produce your output.


But if I had zero productivity in the first place (i.e. I am a consumer) then productivity has gone up (at the national level).


If you had zero productivity, would you be able to buy electricity? You could collect sticks, maybe.


Not sure I understand your reply. My point is that a consumer, who could save their money, or spend it, has (in this example) left the lights on and so is spending their money on electricity. The nation has produced (and sold) more electricity, so GDP has increased. Provided that the consumer hasn't cut back on some other spending, then GDP is up (maybe savings are down?).

If the consumer is retired and drawing a pension (as a fair few consumers are!) then they are counted as non-productive anyway I thought? I don't see too many pensioners gathering sticks where I live!

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Re: What is Productivity ?

#100392

Postby Nimrod103 » December 1st, 2017, 8:51 am

vrdiver wrote:
Nimrod103 wrote:
vrdiver wrote:
But if I had zero productivity in the first place (i.e. I am a consumer) then productivity has gone up (at the national level).


If you had zero productivity, would you be able to buy electricity? You could collect sticks, maybe.


Not sure I understand your reply. My point is that a consumer, who could save their money, or spend it, has (in this example) left the lights on and so is spending their money on electricity. The nation has produced (and sold) more electricity, so GDP has increased. Provided that the consumer hasn't cut back on some other spending, then GDP is up (maybe savings are down?).

If the consumer is retired and drawing a pension (as a fair few consumers are!) then they are counted as non-productive anyway I thought? I don't see too many pensioners gathering sticks where I live!


I don't really get your point, I'm afraid. AIUI the productivity measures that everyone is getting worked up about concern only those in work, and for labour productivity is the value of output of those in work divided by the number of worked hours to get that value. Hence AIUI the retired consumer is not included in the stats.
The electrical generator is included in the stats. If their productivity is average for the UK, then if they increase their output, it doesn't affect the overall figure for the UK. If they are more productive than the UK average (which I suspect they are), then they will impact the figures and average UK productivity will go up if you turn the lights on and the heating up.
Not captured in the productivity stats is the fact that you have used your wealth to pay for light and heat which have generated no value. Such is the dead weight of the retired on the UK economy.

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Re: What is Productivity ?

#100417

Postby johnhemming » December 1st, 2017, 9:49 am

The danger in the calculation of the productivity figures is that if you have some people employed on low wages who would otherwise be unemployed you have lower "productivity".

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Re: What is Productivity ?

#100426

Postby Nimrod103 » December 1st, 2017, 10:46 am

johnhemming wrote:The danger in the calculation of the productivity figures is that if you have some people employed on low wages who would otherwise be unemployed you have lower "productivity".


Indeed, and this is the conventional explanation for the UK's poor productivity. It follows from our high employment figures.

The trouble is that low wage employees are presumably more likely to be taking up in full things like tax credits (not sure if they are taken into account in the productivity calculation), and while employed are they sufficiently incentivized to go find better paid employment or start up new profitable businesses?

Definitions are a bit of a minefield, which is why I (merely an amateur observer of these things) think that the deficit is perhaps a more meaningful measure of how good our economy is at generating profits and wealth, relative to the spending levels our society deems good. Clearing the deficit has now been pushed out to 2060 or even never, hence there really should be a big push to streamline our economy, eradicate drones from our society, and generally bring in more economic accountability.

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Re: What is Productivity ?

#100458

Postby gryffron » December 1st, 2017, 11:36 am

Nimrod103 wrote:If their productivity is average for the UK, then if they increase their output, it doesn't affect the overall figure for the UK. If they are more productive than the UK average (which I suspect they are), then they will impact the figures and average UK productivity will go up if you turn the lights on and the heating up.

I don't think you understand averages.

Even if the LEAST productive person in the UK increases their output, that will still increase the average.

3, 12, 15... average (mean) = 10
9, 12, 15... average(mean) = 12

I only increased the smallest number, but it still pushed up the average.

Is productvity GDP/total hours worked ?
If so, how do all those government workers (including the NHS) affect productivity? Or is it only private sector workers who count?

Gryff

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Re: What is Productivity ?

#100466

Postby dspp » December 1st, 2017, 11:45 am

For my sins I get to go into various factories around the world.

On a like-for-like basis the UK factories I see are low productivity zones due to an under-investment in capital goods (machinery) and a resulting lack of automation, i.e. labour substitutes for capital. The typical UK employee in these factories is lower skilled, i.e. they would not be able to run the factory machinery in the corresponding non-UK factiry without substantial training. Many of them do not have the basic education (or inclination) to accept that training, and of course in any case if the capital investment were to be made the result would be to eject many of them from the workforce (replaced by machinery). This goes back 80-90 years, it is not a recent phenomenon.

Up to a point that is to be expected. But what is not being acknowledged is the scale of the issue facing the UK. Take Brazil as the comparison with a per capita GDP of $15k vs the UK per capita GDP of $40k. So the UK worker needs to upskill and to take a two-thirds salary cut in order to get to level-peg with a country that is considered a middle-income-trap candidate. Now if you were a factory owner considering an investment in a piece of machinery and you had to choose between putting it in the UK or in Brazil, why on earth would you choose the UK. Why on earth would you risk your capital on the UK workforce upskilling and taking a 2/3 salary cut just to get to a level-peg outcome. It is a no-brainer: you don't gamble, the investment goes into Brazil, or China, or Bulgaria, or Ukraine, or Mexico, or India. I go to many of these places by the way.

So that does indeed leave a load of unproductive people who are already under-employed and who will become even more under-employed. One small welding factory I know in the UK has about 40 staff all doing hand work. I know the jobs going through it and they cry out to be replaced by robots, so down to half a dozen staff and three dozen unemployed. That factory is in the supply chain of one of the companies the pro-Brexit lot la-la about by-the-way. It happens to be kept going by the skills of about 20% of the staff who are non-UK nationals and who are prepared to do the nightshifts thereby keeping utilisation up - without them the factory is likely to go pop. So either way you cut it I see that factory ejecting three dozen UK semi-skilled (20k-£30k/yr) staff out and there are not jobs in the local economy for them.

I listened to a r4 Today interview recently where the respondent was simultaneously bemoaning the lack of primary school teachers and the number of under/unemployed. They mentioned as an aside the lack of skills/education/capacity of many of the unemployed (my memory was they talked about learning disabilities). So get me right: they think that a good outcome is to take people with learning disabilities (whatever they are) and make them the primary school teachers of the next generation, oh and on of course good wages which are public sector payroll.

Basically the UK has to get real with itself that the journey it has been on for the last 40-years has barely begun. During those 40-years the UK has just about kept afloat courtesy of the Thatcher era changes and the gift that kept giving of North Sea oil. Both have run out of steam, hence the ever-weakening pound (take the long view and call up a 40-yr chart) and the perennial balance of trade deficit (they are the two sides of the same story).

My personal opinion is that the Brexit vote was by-and-large a vote against globalisation. The bad news is that the journey is not over and the UK has just switched to the high-pain pathway. Income disparities will go up (not down) as a result, and it is likely that unemployment and underemployment will increase. Any gains, such as they are, will accrue even more to London - there have been no economic uplifts outside of the London/SE area to really speak of in my working lifetime (absent a very few pockets), and I expect that to get worse.

How to fix it ? Well being honest about where the UK is is a good place to start, and heading in a different direction that the utterly stupid Brexit direction is a better pathway to take. But even with that it is going to hurt a lot more. With those two encumbrances it is going to be very bad indeed for most UK people.

regards, dspp

[edit : macroecomic productivity = GDP/people, i.e. per capita GDP. That is why I used the GDPpc numbers above. But before you all shout at me and say that shows UK is 3x as productive as Brazil, what you have to recall is that the UK is highly skewed upwards by the City etc, and Brazil is skewed downwards by last generation of rural poor, i.e. the trend is against the UK. That is the problem for the UK]

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Re: What is Productivity ?

#100526

Postby Nimrod103 » December 1st, 2017, 1:41 pm

gryffron wrote:
Nimrod103 wrote:If their productivity is average for the UK, then if they increase their output, it doesn't affect the overall figure for the UK. If they are more productive than the UK average (which I suspect they are), then they will impact the figures and average UK productivity will go up if you turn the lights on and the heating up.

I don't think you understand averages.

Even if the LEAST productive person in the UK increases their output, that will still increase the average.

3, 12, 15... average (mean) = 10
9, 12, 15... average(mean) = 12

I only increased the smallest number, but it still pushed up the average.

Is productvity GDP/total hours worked ?
If so, how do all those government workers (including the NHS) affect productivity? Or is it only private sector workers who count?

Gryff


Yes you are right, maths was never my strong suit. The point I was trying to make was that if the electricity generators just produce more electricity using the same productivity as before, by taking on more workers pro rata to do it, their productivity doesn't increase. It only increases if more electricity is produced from the same number of workers.
A couple of anecdotes - when I drive past road works in France, I see a small number of workers busily getting on with the job. When I drive past road works in the UK I see machines lying idle, while a group of workers are at one end staring into a hole. On a recent documentary I saw about rerailing a power car in Paddington station (which had done some damage to the track), there seemed to be a vast army of orange overalls swarming around, but it still took a couple of days before the disruption was over.
These are only anecdotes, but it is the way I feel about UK productivity.

AIUI Government workers and the NHS still have productivity measured (in some way) and are included in the Govt statistics. Very subjective I'll admit.


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