The UK’s productivity puzzle costs private sector workers £5,000 a year

The UK’s lack of multi-factor productivity growth is estimated to cost private sector workers an estimated £5,000 a year (on average) in lost income, said Katherine Kent, head of productivity at the Office for National Statistics (ONS).

UK labour productivity, measured by output per hour, in the first quarter of 2019 dropped by 0.2% compared with the same quarter in 2018, according to new figures published by the ONS.

UK productivity since the financial crisis has been growing more slowly than during the long period prior to downturn. The ONS says that this sustained period of declining labour productivity represents a continuation of the UK’s “productivity puzzle”.

Productivity in the first quarter of 2019 was 18.5% below its pre-downturn trend.

What’s the effect this has had on wages?

According to Katherine Kent, head of productivity at the Office for National Statistics (ONS), if productivity had grown in line with its long-term trend, and wages as a share of income had remained constant, average market sector wages would today be just over £5,000 in 2018 for the average worker.

The UK economy has recovered since the financial crisis, however, productivity growth has not. The reason why is still unclear, but the productivity problem is holding wage growth back.