06 October 2017

The UK's economic productivity has fallen again, deepening the productivity gap between the nation and our G7 competitors, which is already at its widest on record.

Hourly output fell 0.1% in the second quarter of 2017, according to the Office for National Statistics, and productivity growth has been trailing since the recession.

This trend is part of what is being called the Productivity Puzzle, as economists are attempting to understand how the toil put in by UK workers is no longer creating the same value for the economy as a whole despite a high employment rate.

Many experts have put this down to a reliance on low-skilled, low-paid work, with an increasing proportion of the population now trapped in precarious employment such as on zero-hours contracts, temporary agency work, or bogus self-employment in the gig economy.

Indeed, the government's own employment tsar Matthew Taylor was quoted last year as saying: "This [productivity] problem is complex and multifaceted, but there is little doubt that one facet is bad work".

"Despite the evidence that employee engagement contributes to higher productivity, overall levels of reported employee engagement are low in the UK by international standards, and the proportion of low-skilled workers in the UK who report that they have no freedom to share the organisation of their work has, according to one survey, increased from 42% to 57% over the last decade," he added.

Moreover, Taylor revealed: "Levels of investment in employee training and learning is less than half of that of our European competitors and have fallen even further in recent years."

The Institute of Employment Rights proposes that employers should be encouraged to move away from a low-skill, low-pay model and to compete through innovation of their products and services instead.

In our Manifesto for Labour Law – adopted by the Labour Party as a blueprint for future employment legislation – our experts recommend the reinstatement of sectoral collective bargaining, through which trade unions and employers' associations agree to labour standards that must be applied sector-wide. These agreements should cover not only pay and conditions for the workers, but also training and apprenticeships to strategically upskill the workforce across British industry.

Furthermore, this upward pressure on wages will discourage employers to compete on a race to the bottom on employment rights, but by improving the quality of their business and their overall productivity.

Read more about our Manifesto for Labour Law here