UK Productivity gap widens further


Recent figures published by ONS show that productivity in the UK was 18 percentage points below the average for the rest of the major G7 advanced economies in 2014, the widest gap since estimates began in 1991. On output per hour worker basis, UK productivity was 19 percentage points below the average for the rest of the G7 in 2014. The results show that UK labour productivity trails behind US in all sub-sectors and especially in manufacturing while within the financial and non-financial services, UK’s comparative productivity has deteriorated sharply since 2009. Responding to the figures, Frances O’Grady of the TUC said: “The yawning productivity gap between us and other countries shows how much room there is for us to do better.” 


While the Government is keen to address the issue, its flagship ‘Productivity Plan’ aimed at ‘fixing the foundations’ of the British economy was said to be ‘lacking clear and measurable objectives’ by the Business Innovation and Skills (BIS) Select Committee. Meanwhile, a Government spokesman said it would ‘carefully consider’ the committee’s report and respond in due course.


Gerwyn Davies, labour market adviser for the CIPD, said that there was “an urgent need to raise productivity ambitions before pay growth could equal job increases.” Neil Carberry, CBI director for employment and skills stressed on the importance of innovation and expanding the role of research and development to boost productivity.


Additionally, recent work by the IPA showed that employee involvement could be the missing piece of the productivity puzzle. 


Gender pay gap reporting to be mandatory from 2018


From 2018, companies with more than 250 employees will have to disclose how much they are paying in salaries and bonuses to their male and female staff. The Government intends to draw up a league table of around 8,000 firms to ‘draw attention to the worst offenders’.


Under the Equal Pay Act, it is illegal to pay different amounts to men and women doing the same jobs – but estimates from the ONS suggest the pay gap currently stands at 19.2 per cent for full- and part-time workers in the UK – with ‘a woman on average earning around 80p for every £1 earned by a man.’ 


Minister for Women and Equalities, Nicky Morgan, said: “We have been clear that you can’t have true opportunity without equality and that’s why eliminating the gender pay gap is a key priority for this government.” While business groups like the CBI have expressed concerns about the regulation saying that the league tables should not be used by the Government to“name and shame firms”, the Labour Party and Trade Unions have criticised the Government’s timeline for the new legislation – saying ‘female employees should not have to wait for another two years to find out if they were being underpaid.’ 


Increase in employment and hours worked but UK wage growth slows


The recently published ONS figures show that there was an increase in the number of people in work to a record high of 31.42 million in the three months to December 2015 from the previous quarter, but that wage growth excluding bonuses only rose slightly to 2 per cent from 1.9 per cent. The UK employment rate stands at 74.1 per cent, and the total number of unemployment people fell to 1.69 million. Ian Duncan Smith, Secretary of State for Work and Pension said: “February is another record-breaking month with the employment rate now at the highest it has ever been and wages continuing to grow.”


Employees across the UK also worked an extra 17.2 million hours in the three months to December, which equates to on average, 32.2 hours per person, per week. But despite the increase in the number of jobs and the increase in the number of hours spent in work, average weekly earnings for employees across Britain increased by just 1.9 per cent, including bonuses and, 2 per cent excluding bonuses, in a year. 


John Philpott, Director of The Jobs Economist consultancy, said: “Despite the good news on jobs, this suggests deterioration in an already dire underlying productivity performance and in part helps explain why average weekly earnings excluding bonuses are still rising at an annual rate of only 2 per cent.”