Andy Haldane says raising wages will boost productivity
The UK government should focus on ‘good work’ – especially raising the pay of those at the bottom of the labour market closer and encouraging greater worker voice and representation – to address the UK’s productivity problem, new research suggests.
The findings are outlined in a new essay collection introduced by Andy Haldane, chair of the government's Industrial Strategy Council, and published by Carnegie UK Trust and the RSA. Can Good Work Solve the Productivity Puzzle? features new quantitative and qualitative analysis and opinion from nearly 20 key experts.
The researchers point out that despite record high employment, the economy is not delivering good work for everyone: 25% of workers earn less than the real Living Wage, while there are almost 900,000 workers on zero hours contracts, according to the ONS.
New research by Professor Chris Warhurst and Derek Bosworth of the Warwick Institute for Employment Research, unveiled in the collection, reveals that some focused interventions and aspects of ‘good work’ seem to deliver more substantial productivity gains than others.
They conclude that good work and productivity initiatives will be most effective if they are focused on tackling poor quality work, so that it is, at a minimum, closer to the average levels, rather than seeking to improve all forms and features of work in the UK.
This means the economic imperative of high productivity aligns with the social justice goal of making work better for those who are currently least well served by the labour market.
Other themes explored by experts in the collection include:
- On technology and automation, the RSA’s Fabian Wallace-Stephens and Sarah Darrall argue that as new technologies enter the workplace, engagement of employees and line managers is critical. Applying the extensive research insights of McKinsey, Tera Allas shows that without a commitment to better work many of today’s labour market inequalities are likely to be exacerbated by the unfolding fourth industrial revolution, and the Confederation of British Industry’s (CBI) Josh Hardie argues that effectively adopting productivity-enhancing technology is dependent on having good work conditions in place. Meanwhile Kate Bell from the Trades Union Congress (TUC) argues that the implementation of the coming wave of technological change should remedy the failure of previous technological shifts to put workers first.
- On low-income and equalities, Louise Woodruff from the Joseph Rowntree Foundation (JRF) argues that designing business practice and policy solutions to address good work and productivity must connect with the everyday lives and concerns of people working on low or unpredictable incomes. Matthew Whittaker, formerly of the Resolution Foundation, finds that the labour share of GDP has fallen much less in the UK than in many other developed economies while recent rises in the value of minimum wage have meant that those at the bottom of the wage distribution have actually done relatively better in wage growth than the group immediately above them. Ultimately, he cogently argues, it is only by raising productivity that we can improve pay.
- On regional inequalities, Anna Round from IPPR North points out the role for local authorities, cities and regions to develop their own initiatives to improve good work and productivity challenges particular to their area, such as prioritising worker health to close the North’s productivity gap.
The report will be launched at the RSA on Thursday 16 January 2020, with speakers including Andy Haldane, chief economist at the Bank of England, Tera Allas, Director of Research and Economics at McKinsey, Kate Bell, Head of Rights, Social, International and Economics at the TUC and Sarah Davidson, CEO of the Carnegie Trust. Media are invited to attend – please accredit via firstname.lastname@example.org.
Andy Haldane, chair of the UK’s Industrial Strategy Council and chief economist of the Bank of England, said:
“Productivity in the UK has flat-lined during the past decade. Working out how to address this crisis is the biggest challenge facing UK economic policy makers today.
"Improving work quality, on issues such as security, training, progression and engagement, offers one potential route to overcoming this challenge. This is particularly true amongst the least productive sectors of the economy, where pay, productivity and a ‘long tail’ of work quality would all benefit from a boost. Improving management skills across the UK economy and ensuring that new technologies are deployed effectively will be critical if we are to simultaneously solve the UK’s productivity puzzle and enhance the quality of work that people experience.”
Matthew Taylor, chief executive of the RSA and the government’s interim director of labour market enforcement, said:
“It’s no secret that the new government has been elected in part by workers who’d not normally think of voting Conservative. Many of these people don’t feel they are sharing in the UK’s prosperity. They will be expecting the government to act.
“If prosperity isn't shared with workers and if the labour market doesn't deliver good work, then we stand little chance of boosting our productivity in the long-run.
“Government cannot do everything, but it can focus on creating the conditions for good work for all, so that people in low-skilled jobs have more control over their working hours, benefit from a sense of progression and lifelong learning, are aware of their rights at work and ultimately see the link between hard work and fair pay restored.”
Sarah Davidson, chief executive officer of the Carnegie Trust UK, said:
“Good work is vital to our wellbeing – enabling us to provide for ourselves and our families, build connections in our communities and establish our individual and collective sense of purpose and identity. Too many workers across the UK still experience work which is low paid, insecure or offers few opportunities for development and progression. There is much still to be done to ensure that good work is available to all, improving wellbeing and helping to unlock the UK’s productivity puzzle."
Ash Singleton, Head of Media & Communications, RSA: email@example.com, 07799 737 970.
The RSA (Royal Society for the encouragement of Arts, Manufactures and Commerce) is an independent charity which believes in a world where everyone is able to participate in creating a better future.
Through our ideas, research and a 30,000 strong Fellowship, we are a global community of proactive problem solvers, sharing powerful ideas, carrying out cutting-edge research and building networks. We create opportunities for people to collaborate, influence, and demonstrate practical solutions to realise change.
Our work covers a number of areas including the rise of the 'gig economy', robotics & automation; education & creative learning; and reforming public services to put communities in control.
The Carnegie UK Trust works to improve the lives of people throughout the UK and Ireland, by changing minds through influencing policy, and by changing lives through innovative practice and partnership work. The Carnegie UK Trust was established by Scots–American philanthropist Andrew Carnegie in 1913.