The Anatomy of UK Labour Productivity: Lessons from New and Existing Data Sources

an article by Philip Wales (Office for National Statistics, UK) published in National Institute Economic Review Volume 247 Issue 1 (February 2019)

Abstract

The UK's recent productivity performance has been strikingly weak. Output per hour worked, which increased by around 2.1 per cent per year in the decade leading up to the economic downturn, increased by just 0.2 per cent per year in the ten years following the global financial crisis.

This paper presents three ‘stylised facts’ on the UK's recent productivity performance through the lens of official statistics:

• the weakness of recent productivity growth;
• the ‘gap’ in productivity terms between the UK and other leading economies; and
• the large differences in productivity between businesses.

It surveys recent work by ONS to help researchers and policy-makers to understand the UK's productivity performance, including new experimental and official statistics, analysis and research.

It concludes by drawing together the key findings of these new statistics, highlighting how further improvements might be made through the greater use of survey and administrative data.

JEL Classification: J24, E24, D24

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The impact of technological progress on labour markets: policy challenges

an article by Maarten Goos (Utrecht University, the Netherlands) published in Oxford Review of Economic Policy Volume 34 Issue 3 (Autumn 2018)

Abstract

This paper gives an overview of current thinking by economists about the consequences of ongoing technological progress for labour markets, and discusses policy implications.

In economics, the impact of technological progress on labour markets is understood by the following two channels:

1. the nature of interactions between differently skilled workers and new technologies affecting labour demand and
2. the equilibrium effects of technological progress through consequent changes in labour supply and product markets.

The paper explains how the ongoing Digital Revolution is characterized by a complex interplay between worker skills and digital capital in the workplace, and consequent changes in job mobility for workers and in output prices affecting consumer demand for goods and services. In particular, it explains how current worker–technology interactions and the equilibrium effects they entail combine to create economy-wide job polarization with winners and losers from ongoing technological progress.

The paper therefore concludes by discussing a set of policy interventions to ensure that the benefits of the Digital Revolution are broadly shared.

JEL Classification: J24, J28, O30

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The relationship between flexible employment arrangements and workplace performance in Great Britain

an article by Eleftherios Giovanis (University of Verona, Italy) published in International Journal of Manpower Volume 39 Issue 1 (2018)

Abstract

Purpose
There is an increasing concern on the quality of jobs and productivity witnessed in the flexible employment arrangements. The purpose of this paper is to examine the relationship between various flexible employment arrangements and the workplace performance.

Design/methodology/approach
Home-based working, teleworking, flexible timing and compressed hours are the main employment types examined using the Workplace Employee Relations Survey (WERS) over the years 2004 and 2011 in Great Britain. The workplace performance is measured by two outcomes – the financial performance and labour productivity. First, the determinants of these flexible employment types are explored. Second, the ordinary least squares (OLS) method is followed. Third, an instrumental variable (IV) approach is applied to account for plausible endogeneity and to estimate the causal effects of flexible employment types on firm performance.

Findings
The findings show a significant and positive relationship between the flexible employment arrangements and the workplace performance. Education, age, wage, quality of relations between managers-employees, years of experience, the area of the market the workplace is operated and the competition are significant factors and are positively associated with the propensity of the implementation of flexible employment arrangements.

Social implications
The insights derived from the study can have various profound policy implications for employees, employers and the society overall, including family-work balance, coping with family demands, improving the firm performance, reducing traffic congestion and stress among others.

Originality/value
It is the first study that explores the relationship between flexible employment types and workplace performance using an IV approach. This allows us to estimate the causal effects of flexible employment types and the possible associated social implications.

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Measuring The Permanent Costs of Brexit

an article by Hugo Erken, Raphie Hayat, Carlijn Prins, Marijn Heijmerikx and Inge de Vreede (Rabobank, Netherlands) published in National Institute Economic Review Volume 244 Issue 1 (May 2018)

Abstract

We analyse the costs of Brexit.

The results show that by 2030 a hard Brexit would reduce cumulative GDP growth by 18 percentage points compared to a situation where the UK continued its EU membership.

The economic damage in our FTA and soft Brexit scenarios is less severe than in our hard Brexit scenario, although it will still cost the UK economy roughly 12.5 percentage points and 10 percentage points of cumulative GDP growth by 2030, respectively.

We find much larger negative effects than most existing studies that use macroeconometric modelling to assess the effects of Brexit.

This is due to two reasons.

• First, we use an improved tariff version of the macroeconometric model NiGEM, which enables us better to assess the negative impact of cost-push inflation resulting from imposed trade barriers.
• Second, we estimate a new productivity model for the UK, which allows us to gauge adequately the negative UK-specific effects on productivity caused by Brexit.

JEL Classification F15, F17, F43, D24

Full text (PDF 10pp)

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Job Anxiety, Work-Related Psychological Illness and Workplace Performance

an article by Melanie K. Jones (Sheffield University), Paul L. Latreille (Sheffield University and IZA) and Peter J. Sloane (Swansea University; National Institute of Labour Studies, Flinders University; and IZA) published in the British Journal of Industrial Relations Volume 54 Issue 4 (December 2016)

Abstract

This article uses matched employee-employer data from the British Workplace Employment Relations Survey to examine the relationship between employee psychological health and workplace performance in 2004 and 2011.

Using two measures of work-related psychological health – namely employee-reported job anxiety and manager-reported workforce stress, depression and anxiety – we find a positive relationship between psychological ill-health and absence, but not quits.

The association between psychological ill-health and labour productivity is less clear, with estimates sensitive to sector, time period and the measure of psychological health. The 2004–2011 panel is further used to explore the extent to which change in psychological health is related to change in performance.

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Vintage effects, aging and productivity

an article by Anna Lovász (Hungarian Academy of Sciences, Budapest, Hungary) and Mariann Rigó (Central European University, Budapest, Hungary) published in Labour Economics Volume 22 (June 2013)

Abstract

We provide new empirical evidence on the link between age and productivity using a transitional context. Building on a model of skill obsolescence, we assess the long-term adjustment process following a sudden change in skills needed in production that severely worsened older workers' labor market situation.

The model implies that

1. the devaluation of skills should affect highly educated older workers more severely,
2. the disadvantage should disappear over time as newer cohorts acquire more suitable human capital, and
3. the timing should differ among firm ownership types, reflecting the inflow of modern technologies and practices.

Rather than focusing on wage differentials, we estimate the firm-level productive contribution of older relative to younger workers differentiated by education level. To assess long-run trends, we adapt the augmented production function methodology developed in international literature and apply it to a linked employer-employee dataset from Hungary covering from before (1986) to 20 years after (2008) the economic transition.

The results suggest that – in line with the model – the within firm productivity differential between older and younger workers following the transition was largest among the highly skilled. The fall in relative productivity followed the inflow of modern capital: the gap was largest in 1992–1995 in foreign-owned firms, while it appeared gradually and was smaller in domestic firms.

The magnitude and the negative effects of the adjustment period witnessed in Hungary highlight the importance of policies aimed at providing core competencies and adult training that enable older workers to adjust to sudden economic and technological changes.

Highlights

► We investigate the link between age and productivity in a transitional context.
► We study the impact of economic skill obsolescence in the long run.
► Highly educated older workers are more affected than unskilled ones.
► Their disadvantage disappears over time.
► The timing of the shock differs among firm ownership types.

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