The UK productivity gap

Transcription

1 The UK productivity gap Foundation for Science and Technology meeting, 23rd March, 2005 Jonathan Haskel Queen Mary, University of London and AIM

2 The productivity gap Why productivity is important How much is the gap? What explains it Competition Skills

3 The well-being of nations (GDP per citizen per day $US, 2002) US UK Sub- Saharan 1 2? US UK Sub-Saharan?

4 GDP per citizen and productivity GDP GDP Employee = Citizen Employee Citizen = productivity employment rate Are cross-country differences due to productivity or employment rates?

5 GDP per citizen per day and per worker 250 per day ($US per day, 2002) GDP/citizen per day GDP/worker per day 50 0 US UK Kenya

6 Time taken for a US worker to produce what other workers produce per year Months Keynan Worker UK worker

7 The productivity gap with Germany, France and the US (UK=0, 1999, value added per hour, market economy) Output/Employee Ger France US

8 The US/UK gap by industry Share of UK-US Gap, 2001 Mining/quarrying E lectricity, gas, water Transport and s torage Construction Post and telecom Hotels and restaurants Manufac turing (exc l. m ach+equip) Structural component Business services Machinery and equipment Financial interm ediation Wholesale and retail -5% 0 5% 10% 15% 20% 25% Sourc e: aut hors' calculations using OEC D data, U S measured at f actor costs Three industries account for 50% of the gap (wholesale, machines, financial)

9 What causes differences in productivity? Inputs: capital, labour, raw materials Quantity Quality (computers, skills) Efficiency with which they are used Efficiency of firms Efficiency of the market in sorting good and bad firms

10 How much do quantity of inputs Way to calculate matter? Labour prod = Output Labour input Total factor prod = Output ( Labour and capital input) Lab Prod differences= capital and efficiency TFP differences = efficiency

11 How much more capital and skill inputs do other countries have? (UK=0, 1999, using value added and hours, market economy) Ger France US 10 0 Output/Emp Cap/emp Skills index TFP

12 So what explains the TFP gap? Competition Skills

13 Turbulence in the economy: Job Creation and Job Destruction in UK manufacturing Ch in Year employ : Total -1,933,256 Per week -3,380

14 Turbulence in the economy: Job Creation and Job Destruction in UK manufacturing Year Ch in employ JC JD : Total -1,933,256 6,010,343 7,943,599 Per week -3,380 10,508 13,887

15 Turbulence in the economy: Job Creation and Job Destruction in UK manufacturing Ch in Year employ JC JD : Total -1,933,256 6,010,343 7,943,599 Per week -3,380 10,508 13,887 Of which: % by firms under % by firms over

16 Competition: the long tail hypothesis the best performers are as good as anyone but UK is let down by a long tail of poor performers

17 Is there a UK productivity tail? percentage tfp va/emp relative productivity Labour prod gap: 5:1 TFP gap: 2:1

18 How does the UK productivity tail compare? (Value added per worker by quartile, manufacturing) PPP$ per worker FIN NLD USA Quartiles

19 How does the UK productivity tail compare? (Value added per worker by quartile, manufacturing) PPP$ per worker FIN GBR NLD USA Quartiles

20 Competition via sorting Prod grows by incumbent firms growing and getting market share exit of bad firms,entry of good ones Prod standard deviation by cohort

21 Productivity of survivors, entrants and exitors (% differences from survivors) Survivors Entrants Exitors -3-4 Output/Employee

22 Size of supermarkets (Competition Commission, 2000, Minimim Efficient Scale 3,000 sq m) Spain France Italy UK Germany US # of stores 5,670 8,820 6,073 4,720 23,680 22,000 Avg. store size ( 000 sq.m.)

23 Size of supermarkets (Competition Commission, 2000, MES 3,000 sq m) Spain France Italy UK Germany US # of stores 5,670 8,820 6,073 4,720 23,680 22,000 Avg. store size ( 000 sq.m.)

24 Division of workforce by skill 1999, higher level (degree and above), intermediate vocational (more than general schooling but below degree) and rest UK US France Germany 10 0 Higher Intermediate Low

25 Skills and the cross-country gap Most skilled versus least skilled countries 8 years of education difference Suppose a year of education raises worker productivity by 10% most skilled would be 2.2 times as productive But top is 37 times as productive

26 Public spending per pupil on education University 5,300 Post 16 college 4,300 Secondary 4,000

27 Public spending per pupil on education University 5,300 Post 16 college 4,300 Secondary 4,000 Primary 3,200 3 yr olds 1,800