Understanding the UK’s productivity problems. New technological solutions or a case for the renewal of old institutions?

Date11 February 2019
Published date11 February 2019
DOIhttps://doi.org/10.1108/ER-10-2018-0273
Pages296-312
AuthorPaul Lewis,Kate Bell
Subject MatterHR & organizational behaviour,Industrial/labour relations,Employment law
Understanding the UKs
productivity problems
New technological solutions or a case for the
renewal of old institutions?
Paul Lewis
Birmingham Business School,
University of Birmingham, Birmingham, UK, and
Kate Bell
Head of Economic and Social Affairs Department, TUC, London, UK
Abstract
Purpose The purpose of this paper is to examine the nature, causes and consequences of the UKs
productivity problems and whether these may be addressed through the new technologies of artificial
intelligence (AI).
Design/methodology/approach This paper reviews the literature on productivity to explain how it
relates to earnings within different theoretical frameworks, advocating a power over rentsframework as
most realistic. It explains the UKs twin productivity problems and reviews their potential causes, critically
assessing the capacity for new technologies of AI to address them. It highlights the enduring importance of
distribution and the design of work to improving the UKs productivity.
Findings The authors find that the UKs productivity problems will not be solved by AI technologies due
to technical and socio-technical challenges which will require the significant re-design of work. The authors
highlight the importance of aggregate demand, which has been inhibited by the shifting distribution of
income towards capital and rising inequality of earnings. These issues suggest an important role for trade
unions and a renewal of the institutions of employment regulation and collective bargaining. While reversing
recent trends raises considerable challenges, the authors observe renewed interest in trade unions from
previously hostile thinktanks and international institutions including the IMF and OECD.
Originality/value This paper advocates adopting a power over rentstheoretical framework
to understanding productivity and the distribution of gains. This provides a clear rationale for the role of
trade unions, employment regulation and collective bargaining in improving distributional outcomes, raising
firm-level productivity and achieving real productivity growth at an aggregate level.
Keywords Productivity, Inequality, Collective bargaining, Artificial intelligence
Paper type Conceptual paper
1. Introduction
Developed economies and the UK in particular have experienced what has been labelled a
productivity problem since the financial crisis of 2008. That is, real productivity growth has
been historically low with consequent effects for economic growth, real wage growth and tax
revenues. The UK faces a further problem that its recent nominal productivity, measured in
current price terms, is one of the lowest of the industrialised countries (ONS, 2018a).
It has become a focus of government, academics and the media to diagnose and suggest
initiatives to address these problems. A range of diagnoses have been put forward for the
widespread low productivity growth, which are broadly pessimistic for the future
(e.g. Summers, 2016; Gordon, 2016). Counterposed with this is huge anticipation that
artificial intelligence (AI) technologies are poised to revolutionise work and, in doing so,
dramatically increase productivity (Brynjolfsson and McAfee, 2014; Frey and Osborne,
2013). The hope is that, if implemented effectively, these new technologies could also
Employee Relations: The
International Journal
Vol. 41 No. 2, 2019
pp. 296-312
© Emerald PublishingLimited
0142-5455
DOI 10.1108/ER-10-2018-0273
Received 19 October 2018
Revised 10 December 2018
Accepted 11 December 2018
The current issue and full text archive of this journal is available on Emerald Insight at:
www.emeraldinsight.com/0142-5455.htm
The authors would like to thank the editors of the special issue and two anonymous referees for their
extremely helpful comments and suggestions.
296
ER
41,2
improve the nominal productivity of UK sectors and firms, hence the focus of UK research
councils on the intersection of innovation, productivity and management[1].
We argue in this paper, however, that the focus on solving the UKs productivity
problems through technology is likely to disappoint and will not automatically lead to
the widespread sharing of benefits for workers. The other major political economy concern
of recent times, high and growing inequality, suggests that as well as the generation of
economic product, we also need to pay attention to its distribution. In fact, addressing
inequality could be a key component in solving the productivity problems. In this regard,
trade unions more than ever have an important role to play through the mechanism of
collective bargaining and the involvement of workers in the organisation of work.
This paper proceeds as follows. Section 2 outlines the different measures of
productivity and how they relate to income growth. Section 3 adopts a power over rents
framework to explain the falling labour share of national income and rising inequality
which inhibit aggregate demand. Section 4 presents the empirical evidence for the UKs
twin productivity problems and examines the different mainstream diagnoses of low
productivity growth. Section 5 critically examines the arguments for AI revolutionising
work and productivity, highlighting the technical and socio-technical challenges. Section 6
draws the previous sections together in order to argue that addressing the UKs
productivity problems requires first addressing the distribution of economic surplus and
worker involvement in the design of work, which, in turn, requires the institutional
strengthening of labour in the employment relationship.
2. Productivity and its relationship to income growth
Workers, consumers and politicians all have an interest in productivity growth as it
increases real incomes with attendant benefits for consumption and taxation. As
Krugman (1994) puts it, Productivity isnt everything, but, in the long run, it is almost
everything(p. 8).
It has also been a longstanding concern of industrial relations scholarship and practice,
where the relationship between the real output of workers, the nature of wage agreements
and the consequence for product prices and real incomes ran through discussions of, and
experiments with, collective bargaining and incomes policy from the late 1940s until the
end of the 1970s (Flanders, 1963; Burchill, 1970; Clegg, 1971; Brown and Nolan, 1988;
Ahlstrand, 1990; Brown and Edwards, 2009).
To understand how productivity relates to incomes requires an outline understanding of
the measure and the mechanisms through which companies and workers benefit.
At its simplest, productivity is a measure of output over input. The measure of output
commonly used is gross value-added (GVA) which measures the value-added created in the
production of a good or service by taking the value of the products sold (quantity times
price) and subtracting the value of all intermediate goods or services used up in their
production. A commonly reported input measure is the number of workers or worker-hours
that have gone into producing the particular good or service. Labour productivity is
therefore the GVA produced per worker or worker hour for a given sector or group of
sectors in a specified geography. Hence, labour productivity for the UK provides an average
view of GVA per worker-hour across all of the economic activities performed there[2].
When considering productivity growth, economists and statisticians are interested in the
increase of labour productivity independently of price changes. This is because price
inflation is not an indication that we are producing more goods or services per worker than
we were before. Hence, productivity increases are usually reported as a volume or real
measure of productivity and are calculated by holding prices constant for a period of time,
and measuring the additional volume of goods or services produced per worker hour
(see Lewis and Peng, 2018 for further details of productivity measures).
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The UKs
productivity
problems

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