The UK is in the midst of the longest stall in productivity growth in living memory. Productivity – which measures economic output per unit input – remains barely higher than it was nine years ago. Productivity is 15 per cent lower than where it would have been had the pre-crash trend continued. Whilst a slowdown in productivity growth is common following a recession, the duration of the stall is unprecedented. This has led to a growing gap between the UK and other advanced economies. We are now 17 per cent less productive than the rest of the G7 and the average worker in France and Germany produces more in four days than the average UK worker does in five.
Productivity is a vital indicator of the health of an economy and the stall should be a real cause for concern. Boosting productivity is essential to maintaining competitiveness and competing in what the Prime Minister has dubbed the ‘global race’. Productivity is a key determinant of living standards. Strong and sustained growth in wages requires strong and sustained growth in productivity. It’s no coincidence that the stall in productivity has coincided with a lengthy squeeze on median real incomes which remain below their 2007 peak. In the context of ongoing austerity, boosting productivity in the public sector and doing ‘more for less’ is also vital if we are to mitigate some of the impact of large cuts on services and outcomes.
In a report released by the IPA today, we argue that effective employee involvement at work is essential to boosting productivity in the UK. The report ‘Involvement and Productivity – The missing piece of the puzzle?’ examines the wealth of evidence linking employee involvement to productivity. The evidence – from large surveys, behavioural experiments, academic studies, and from employers themselves – demonstrates that when employees have a voice in decisions over their job and the wider organisation, productivity is higher.
This should not come as a great surprise. Employees on the front line have a detailed understanding of an organisation’s customers, its processes, its products and services. Employees can be an immense source of innovation and ideas that can improve how an organisation operates, a source that is all too often untapped. And when employees are given a say, they will be more engaged and more motivated.
As the report shows, the UK performs poorly on involvement at work. Just one employee in three say their managers allow them to influence decisions at work and employers in the UK are less likely to adopt practices associated with employee involvement. The decline of collective bargaining has weakened employee voice and the UK has a comparatively light-touch regulatory framework regarding employee involvement.
Employers who involve and engage their staff, who give them a say over both how they do their day job and over wider organisational decision-making tend to be more productive and more successful. Many employers are well aware of this and involve their staff effectively at work. Take the resurgent UK automotive industry which is characterised by high levels of employee involvement in continuous improvement, high levels of union membership, high productivity and high pay. We need to help the rest learn from the best.
Last year the Government released ‘Fixing the foundations’, their plan to boost productivity and create a more prosperous nation. It is welcome that after many years of stalled productivity growth, the subject is finally receiving the attention it deserves. However, their plan had very little to say about the workplace and virtually nothing on employee involvement. And where trade unions were mentioned, this was only in looking back at what is seen as the ‘dysfunctional relationship’ with businesses of the past, rather than looking forward at how they can be partners in boosting productivity.
Any attempt to tackle the productivity puzzle – by employers and by the government – must recognise the importance of employee involvement and voice at work. We hope that this report can help contribute to taking this debate forwards.
Joe Dromey is Head of Policy and Research at the IPA. The report ‘Involvement and Productivity – The missing piece of the puzzle?’ is available here: https://www.ipa-involve.com/resources/publications/involvement-and-productivity/