UK productivity growth - up or down?

It's not all doom and gloom in Blair's Brown's Britain. Labour productivity is trending up, unit wage costs down - according to a release from the ONS today:

In the second quarter of 2006 whole economy productivity growth (measured by output per worker) was 1.8 per cent compared with the same quarter a year ago, up from growth of 1.5 per cent in the previous quarter. The rise in annual productivity growth was due to an increase in output.

...Whole economy unit wage costs in the second quarter of 2006 were 2.0 per cent higher than the same quarter a year earlier, down from a growth of 2.2 per cent in the first quarter of 2006. The slower rate of unit wage cost growth was due to a decrease in the growth rate in average wages and salaries together with an increase in the growth rate of output per worker.

So productivity growth has picked up. Or has it?

The alternative measure of productivity – output per hour worked – showed that hourly productivity grew by 1.7 per cent in the second quarter of 2006 compared with the same quarter a year ago, down from 1.8 per cent growth in the previous quarter.

Output per hour worked is a better measure than per worker, as changes in average working hours (e.g. from the growth of part-time work) distort that series. So on the best available measure, UK labour productivity actually slowed marginally in the second quarter. But the gradual decline in unit costs is good news for inflation.

Comments

[Mohit]

I don't want to sound presumptuous about the UK market however, with all due respects to your experience in the field, the last issue of economist attributes downward pressue on wages to globalisation: http://discombobulatedeconomist.blogspot.com/. Very interesting perspective.

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