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Friday, December 4, 1998 Published at 21:00 GMT


Business

Productivity issue back in vogue

The productivity issue is back in vogue thanks to Rover's problems

BBC Industry Correspondent Stephen Evans assesses the renaissance of the debate about UK productivity.

Suddenly, "productivity" is a buzz word again.

Through the 1980s, it vanished from common discourse, relegated to learned tomes and dry common rooms.

Some economists discussed it but politicians by and large didn't.

The message was that the old problem of low productivity was on its way to being solved. The British disease of idle workers, dividing their time between the picket line and the store-room snooze, had been cured.

Certainly, under Mrs Thatcher, the gap between British productivity and that of Britain's main competitors narrowed.

Making a comeback

But now the word is back on political lips. It is suddenly the central problem of the British economy after a decade of quiescence. Just when you thought the patient was cured, nasty symptoms start appearing.


[ image: Stephen Evans:
Stephen Evans: "Just when you thought the patient was cured..."
Rover's difficulties brought it back to the front pages. When British industry was crying loudly about the strength of the pound making its exports uncompetitive, the government was quick to say that the pound was not Rover's problem. Rather, it was low productivity. And they are right.

Few doubt that Rover workers produce far fewer cars than workers at BMW, Rover's parent company.

Similarly, the head of Ford said recently that his American workers produced five cars for every four turned out by British Ford workers - and this despite great strides on this side of the Atlantic.

The international consultants, McKinsey, reported a similar picture across British industry. Only in pharmaceuticals and supermarkets was the UK the benchmark to which the rest of the world aspired.

Improvements made

The problem is easier described than solved. It is agreed that the gap between British productivity and that of our competitors did narrow in the 1980s. It was partly changed working practices brought about under Mrs Thatcher (though to what extent they would have happened anyway will be debated unproductively for decades).

The closure of inefficient factories also bumped up British productivity - this is the "batting average" argument: get rid of low scorers and the average - but not the total - goes up.

It is also broadly agreed that identifying the productivity of workers alone, rather than some measure which takes machinery into account, is difficult.

In the car industry, for example, they say that putting a new model into a plant increases labour productivity by 20%, even without changing the work-rate or habits of workers. Engineers now design each generation of cars to be made with fewer parts.

Increasing productivity is partly about working more flexibly - at Rover under the new agreement, it means working longer hours when the cars can be sold and fewer when demand is lower.

Investment the key

But the most reputable studies show it is not the whole story. Studies done by the National Institute for Economic and Social Research in London show that the big factor explaining labour productivity (output per worker per hour) is simply the accumulation of modern machinery and skills - in other words, investment over the decades.

The difference between the output of workers at the Nissan plant in Sunderland (the most efficient car plant in Europe) and the workers at Rover's Longbridge plant in Birmingham (one of the least efficient) is not down to any laziness at one and motivation at the other - it is just that the Japanese have invested large sums of money in modern machinery on a new site in the one while the British failed to invest in the other.

The German BMW is now putting right decades of under-investment at Longbridge.

Even though low productivity is back on the political agenda, the argument has changed.

In the 60s and 70s, workers were accused of restrictive practices that kept it low. Today, that is no longer true. According to the National Institute, the main determinant of labour productivity is investment in machinery and plant and in training.

There is no evidence that British workers are any lazier or inept than those in, say, the United States or Germany. In plain English, the difference, rather, is that they are not given the tools.



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