Smarter working and a smarter approach to employment regulation is needed if the remaining productivity gap is to close, according to John Philpott, Chief Economist at the Chartered Institute of Personnel and Development (CIPD). Commenting on the latest international comparisons of GDP per worker, published today, 23rd February, by the Office for National Statistics (ONS); Philpott argues that the improvement shown in todayís figures is the result of sustained economic growth and a return to fuller employment.
Philpott comments, Although the improvement is explained by downward revision to estimated productivity in the other G7 economies; it is nonetheless clear that the íproductivity gapí has been narrowing over time. One possible explanation for this is that the UK has enjoyed a relative productivity pay-off from a decade of sustained economic growth; with low inflation and low interest rates providing a stable platform for increased capital investment. Yet while this may be part of the story, UK business investment has been far from spectacular during the past decade.
Consequently, the major driver of improved productivity is likely to have been the return to ífull employmentí and the impact this had had on employer practice. A tight jobs market has encouraged employers to raise investment in training and make more effective use of people. Training spend has remained robust in recent years as employers have sought to cope with a lack of adequately skilled recruits. But in addition to this, the need to get more from existing staff has triggered improvement in working practices, such as regular appraisal, team based working and performance related pay systems.
The CIPD believes that if the productivity gap is to narrow further, the uptake of effective management practice must spread beyond those businesses able or ready to embrace change, to the long tail of relatively poor performers. Meanwhile, the government must ensure that the burden of employment regulation is not so heavy as to distract employers from their primary task of running successful organisations.
Philpott concludes, The challenge is to bring aspirant and laggard businesses up to the standards of the best performers, while government must adopter a lighter touch approach to regulation. A combination of smarter working and a smarter approach to regulation will help the UK not just narrow but close the productivity gap.í
Fuller employment helps UK narrow productivity gap
But what must be done to close it?
