PAYnotes on economic wellbeing and productivity

In the last few weeks Joe Price has posted a couple of articles - here and here - about employee wellbeing. He’s stressed its importance and discussed the link between reward and wellbeing.

At the end of last year the Office for National Statistics had a rather different spin on a related subject. In December they published data on another form of wellbeing – that is, economic wellbeing. The picture they painted neatly summarises the position that we find ourselves in post-recession and pre-full recovery.

On one hand there are some positive signs. For example, gross domestic product increased in the third quarter of 2014. Also, net disposable income has remained pretty much flat since the start of 2012. Even so, both measures are still below the pre-crisis levels. Meanwhile, household income per person decreased in the quarter. Tellingly, the median income in 2012/13 fell compared to the previous year and hit its lowest level since 2002/03.

The one issue which still seems to be haunting the economy overall is the so-called productivity conundrum which I wrote about back in 2012. Christmas Eve also saw the ONS publish labour productivity figures for the third quarter. They reported that output per hour had increased by 0.6 per cent compared with the previous quarter and was 0.3 per cent higher than a year earlier. However, it remained roughly two per cent lower than it was before the financial crisis of 2008.

The dilemma that this presents also resurfaced recently in a report from the CIPD on predictions for 2015.  Their chief economist, Mark Beatson, argued that there would be continued expansion in the UK labour market throughout 2015 but that there would be no significant growth in wages until 2016 – the reason being that low productivity will continue to apply a brake on pay.

The CIPD’s expectation is that wages will grow by between one and two per cent for most of 2015 and that this will only slightly outpace even the current modest level of inflation. Beatson suggested that productivity should be high on the government’s agenda and called for “systemic change” to improve the situation. In particular it was suggested that the government, employee representatives and businesses should work together to improve workplace practices in order to identify and implement ways to boost productivity. 

Whilst the aim of an improved standard of living is hardly contentious, it remains to be seen if whether the CIPD’s rallying call will resonate with all interested parties, especially in an election year. 

By Peter Brown