We're working more, but doing less: why GDP is so low

Productivity is down year-on-year for the fourth quarter in a row.

Why has GDP been stagnating even while employment and hours worked have been rising? One answer to the question is to point out that the rise in the employment rate has been somewhat overstated; There was a persistent rise for around a year, but that seems to have levelled off in recent months. Furthermore, at a period when the economy was growing, the employment rate was actually flat. It could just be catch-up growth in employment that we are seeing.

But even with those explanations, there's still something to explain. The employment rate has flatlined, but overall employment has continued to grow (although even that dropped off in the first quarter of 2013):

 

Overall employment is a bad measure to use to judge the success of a government, because it has a tendency to rise anyway, thanks to population growth. (Which is why, unsurprisingly, this government is fond of quoting it. "More people in work than ever before" is technically true, but only because there are more people in Britain than ever before.) But it is important for one reason: more people ought to mean more people making things, which ought to mean higher GDP. The fact that it doesn't is worrying.

That's why economists turn to measures of labour productivity, which tell us things like how much output the average worker produces, or how much output is produced per hour. If the country is getting richer, but only because we are working longer hours, for instance, the former measure will rise, but the latter won't. If the country is getting richer, but only because more people are working, then the latter will rise, but the former won't.

We are in the opposite situation. The country isn't getting richer, but more people are working, and they're working longer. And so, as you'd expect, that means both key measures of productivity, released today, are falling:

The ONS adds:

Whole economy output has risen slowly during 2012, while employment and hours rose at a much faster rate. Labour productivity has therefore fallen over the past year on all measures - although it rose in the first quarter of 2013 on an output per worker and output per job basis as employment stagnated while output increased. The weakness in productivity has not been translated into rising unit labour costs, which have fallen over the past year because of the weakness of earnings growth.

As I said yesterday, though, falling labour productivity doesn't solve the puzzle. It just raises a different question: why?

It could be that the slump is to do with the Government's attempt to rebalance the economy from the public to the private sector. If you lay off a lot of talented people in high-productivity jobs and force them to work in a sector which caters to a slightly different set of skills, they may well end up being less productive, especially for the time it takes them to learn how to do their new job.

Alternatively, it may be that employers didn't lay off every employee they could have, instead choosing to keep them on in the hope that, when the depression is over, they won't have to rehire. In that explanation, the drop in productivity is because there isn't enough work to keep all the workers busy. That's the preferred explanation of the Economist's Free Exchange blog, but it doesn't explain why the number of hours worked have risen at the same time.

We have a weak economy. Hopefully it won't stay that way for too much longer.

Working hard or hardly working? A participant in the Chap Olympics competes in a round of Not Playing Tennis, the aim of which is to make the least possible effort to play tennis. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Winning Scottish independence will be even harder than before - but it may be the only choice

Independence campaigners will have to find answers on borders, currency and more. 

The Brexit mutiny has taken not just the UK economy and its relationship with Europe into uncharted waters. it has also imperilled the union between Scotland and England. From Sir John Major to the First Minister, both Unionists and Nationalists had warned of it. The outcome, though, has made this certain. The Leave vote in England and Wales contrasted with an overwhelming Remain vote north of the border.

That every region in Scotland voted to stay In was quite remarkable. Historically, fishing and industrial communities have blamed the European Union for their woes. That antagonism was probably reflected in lower turnout - an abstention rather than a rejection. 

The talk now is of a second referendum on independence. This is understandable given the current mood. Opinion polls in the Sunday Times and Sunday Post showed a Yes vote now at 52 per cent and 59 per cent respectively. Moreover, anecdotal evidence suggests even arch No vote campaigners, from JK Rowling to the Daily Record, are considering the option.

The First Minister was therefore correct to say that a second referendum is now “back on the table”. Her core supporters expects no less. However, as with the economy and Europe, the constitutional relationship between Scotland and England is now in uncharted seas. Potential support for independence may be higher, but the challenges are arguably bigger than before. The difficulties are practical, political and geographic.

Of course the Little Englanders likely to take the helm may choose a velvet divorce. However, given their desire for the return of the Glories of Britannia that’s improbable. They’re as likely to wish to see Caledonia depart, as cede Gibraltar to Spain, even though that territory voted even more overwhelmingly In.

Ticking the legal boxes

Practically, there’s the obstacle of obtaining a legal and binding referendum. The past vote was based on the Edinburgh Agreement and legislation in Westminster and Holyrood. The First Minister has indicated the democratic arguments of the rights of the Scots. However, that’s unlikely to hold much sway. A right-wing centralist Spanish government has been willing to face down demands for autonomy in Catalonia. Would the newly-emboldened Great Britain be any different?

There are no doubt ways in which democratic public support can be sought. The Scottish Government may win backing in Holyrood from the Greens. However, consent for such action would need to be obtained from the Presiding Officer and the Lord Advocate, both of whom have a key role in legislation. These office holders have changed since the first referendum, where they were both more sympathetic and the legal basis clearer. 

Getting the EU on side

The political hurdles are, also, greater this time than before. Previously the arguments were over how and when Scotland could join the EU, although all accepted ultimately she could remain or become a member. This time the demand is that Scotland should remain and the rest of the UK can depart. But will that be possible? The political earthquake that erupted south of the Border has set tectonic plates shifting, not just in the British isles but across the European continent. The fear that a Brexit would empower dark forces in the EU may come to pass. Will the EU that the UK is about to leave be there for an independent Scotland to join? We cannot know, whatever European Commission President Jean-Claude Juncker may be saying at the moment. The First Minister is right to start engaging with Europe directly. But events such as elections in France and the Netherlands are outwith her control. 

Moreover, currency was the Achilles heel in the last referendum, and hasn’t yet been addressed. George Osborne was adamant in his rejection of a currency union. The options this time round, whether a separate Scottish currency or joining the euro, have yet to be properly explored. A worsened financial situation in the 27 remaining EU members hampers the latter and the former remains politically problematic. 

The problem of borders

Geography is also an obstacle  that will be even harder to address now than before. Scotland can change its constitution, but it cannot alter its location on a shared island. In 2014, the independence argument was simply about changing the political union. Other unions, whether monarchy or social, would remain untouched. The island would remain seamless, without border posts. An independent Scotland, whether in or out of the EU, would almost certainly have to face these issues. That is a significant change from before, and the effect on public opinion unknown.

The risk that's worth it

Ultimately, the bar for a Yes vote may be higher, but the Scots may still be prepared to jump it. As with Ireland in 1920, facing any risk may be better than remaining in the British realm. Boris Johnson as Prime Minister would certainly encourage that. 

David Cameron's lack of sensitivity after the independence referendum fuelled the Scottish National Party surge. But perhaps this time, the new Government will be magnanimous towards Scotland and move to federalism. The Nordic Union offers an example to be explored. Left-wing commentators have called for a progressive alliance to remove the Tories and offer a multi-option referendum on Scotland’s constitution. But that is dependent on SNP and Labour being prepared to work together, and win the debate in England and Wales.

So, Indy Ref The Sequel is on the table. It won’t be the same as the first, and it will be more challenging. But, if there is no plausible alternative, Scots may consider it the only option.

Kenny MacAskill served as a Scottish National MSP between 2007 and 2016, and as Cabinet Secretary for Justice between 2007 and 2014.