The recent Budget Statement from the Chancellor of the Exchequer pointed to the low productivity in the UK compared with other countries. This is probably caused by all sorts of complicated factors which economists can deliberate over for hours, but I have a simple explanation.
Productivity at national levels is calculated by taking the GDP of the country and dividing it by the number of hours worked. So there are two ways of increasing the figure. You can increase GDP or reduce hours. I’d like to focus on hours.
We are constantly compared with Germany and France, so let’s look at them in a bit more detail. If UK productivity is 100, Germany is 134.5 and France 128.7. But some of that is because they are working shorter hours. So if you look at the GDP per worker, not per hour, the figures change a bit. Germany comes down to 109.3 and France to 113.0.
Average weekly working hours in Germany are 26.4 and in France 28.5. In the UK we work 32.2 hours per week. So if we kept the same output but just reduced our working week we would increase productivity significantly and catch up with the competition.
We are suffering from a long hours work culture. People who stay late in the office are praised. Workers who put in effort are rewarded based on their input, not on the output they produce. We pay people by the hour, so to get paid more you have to work longer. If there’s not enough work to fill in the extra hours you slow down to justify the overtime. This is a low productivity work model (assuming you are measuring output per hour).
Our ‘Industrial Age’ model of work is one where employers create jobs and pay people by the hour/week/month/year depending on the time they put in. If people are simply doing a mechanical, routine task then maybe there is a reasonable correlation between the hours input and the product they are making. But we are now in the ‘Information Age’ where the routine work is done by robots and computers and we employ humans to do the creative work which cannot easily be automated. So to get high productivity figures we need to stop rewarding long hours and start to recognise output.
The introduction of flexible working patterns has had an interesting effect. Take the example of a mother or father, returning from parental leave and asking to come back to work part time. Most employers welcome back trained, experienced employees and will see if they can fit back into their old role. So the returner takes back the old responsibilities for four days a week to see how it works out.
A year later the manager and employee sit down to work out how it’s going. It turns out that the job is getting done just as well as before, but now in four fifths of the time. The employee is more organised, because they have to integrate childcare into their life, they spend a bit less time chatting at the coffee machine and they might spend some time catching up with work from home. They may even stay at home to work when it’s convenient and find they save time and stress commuting and produce more per hour than in a noisy office. The difficult conversation then arises between manager and employee. “Why am I only being paid four fifths of the salary of my colleagues when I am not only producing the same result but clearly being more efficient in the process?” There is no easy answer.
One way of improving the nation’s productivity figures is by encouraging shorter hours. France has been somewhat successful in doing this through legislation. This has forced employers to think about getting the best out of people whist they are working and not just assuming they are happy to stay on and finish the job. It’s interesting to see that output per worker is still higher in France than in the UK and also higher than Germany. So despite shorter hours, they are still producing more.
So, what is the solution for the UK? How do we increase the output per hour? The simple answer is we stop rewarding people for hours and start rewarding them for output. Implementing this means breaking down the conventional employment model we have lived with for 200 years and replacing it with one more appropriate for the 21stCentury. Let’s give people freedom to do their jobs the way they would like, and see how clever they get at doing the work in a shorter time. Let’s encourage people to go home early and have a better work/life balance. Let’s treat people like adults and trust them to manage their own time. This is not rocket science. It’s what management gurus have been saying for years. Isn’t it about time we took notice and then watched the productivity figures soar? Can someone explain what’s stopping us?