Not as productive as he used to be. (Photo: Getty)
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There's no productivity puzzle: it's the consequence of austerity

Britain's low productivity has become the fashionable malaise as far as our commentators are concerned. But the real problem is austerity. 

On Tuesday, Chuka Umunna reminded us how central ‘productivity’ has been to the post-crisis economic debate. Yesterday the IFS blamed the living standards crisis on the so-called productivity puzzle.

But there is no puzzle about it. Today the TUC publishes a new report showing that the government’s austerity policies should take most of the blame for the productivity failures of recent years.

No-one denies that we need investment in skills, reform of finance and changes to corporate governance if we want productivity growth. But the analysis in the report shows that these can only do their work if the next government invests in growth, which can kick-start a virtuous circle of improved productivity.

In contrast a new round of austerity and public sector pay restraint, as proposed by the Chancellor, is likely to cause further weakness in productivity and damage the potential for sustainable pay growth.

Our argument is in three steps:

Step one: austerity has led directly to lower economic growth.

The economy had begun to recover at the 2010 election, but this was choked off by coalition cuts and the VAT increase.

The chart shows annual increases in government final demand (including wages and salaries, procurement and investment) in cash terms. These have been very subdued relative to increases in previous years: the post-crisis annual increase in spending was £2½ billion a year, compared to the pre-crisis years at around £19½ billion.

 

General government final demand, annual change £ billion

As a result GDP growth has slowed from an average of 5.0 per cent a year before the crisis (2004-08) to 3.7 per cent after the crisis (2010-13) – these are based on GDP in cash terms for reasons that become obvious. While others argue that GDP growth slowed for reasons beyond the government’s control  (namely the eurozone), the following chart of ‘contributions’ to GDP growth before and after the crash show very clearly that government (the brown bit) accounted for all of the reduction in growth of 1.3 per centage points.

Contributions to annual average GDP(E) growth, percentage points

Contributions to annual average GDP(E) growth, percentage points

Step two: The labour market has responded to poor growth through a decline in real wages

This is different to previous recessions which produced higher unemployment.  In the language of supply and demand, this time reduced demand has hit the price rather than the quantity of labour.  

What happens when we have reduced GDP growth is that it has to be absorbed by some combination of what goes to profits and what goes to labour. How labour’s share is allocated between earnings and employment determines whether wages or jobs take the bigger hit.

The latter is shown in the next chart where we have in the jargon decomposed  the total of ‘wages and salaries’  growth from the National Accounts showing the difference between before and after the crash.

 

  

Wages and salaries before and after the crash

The chart shows that within the labour market the reduction in wages and salaries growth has ‘simply’ been met (almost) entirely by lower earnings growth rather than lower employment growth.

Step three: during a downturn if employment remains high productivity must fall

Productivity is defined as the ratio between GDP and employment.

Since the crisis austerity has delivered lower GDP growth, but as employment has remained bouyant, this means that productivity has slowed down. If the labour market had instead adjusted through quantity (slower employment growth) rather than price (higher earnings), then productivity growth would have been higher.

This is an obvious and simple explanation, but it stands in contrast to the vast and ever-expanding literature on explanations for the shortfall in productivity.

These mostly focus on the so-called supply-side, such as a shift from high to low productivity sectors, misplaced capital investment, skills shortages, and dysfunctional credit markets.

While most commentators recognise demand must play a role, few have worked through what that means (the most honourable exception is Bill Martin's and Bob Rowthorn’s work of 2012, on which this and previous TUC work has drawn).

This has been hugely damaging. The experts on whom the media rely and shape the economic and political debate, have let the government off the hook. The real villain, austerity economics, has not even been put on trial in the case against weak productivity. In the meantime the living standards of the many have been hammered.

What is worse is that this error leads to a fundamental policy error. Arguing that we can only have growth and better living standards as a result of productivity increases gets the argument exactly the wrong way round.

The truth is that investment and increases in demand and an end to austerity economics will inevitably boost productivity – and with the right supply-side policies to ensure growth is fairly shared and that investment can get a good return can deliver a virtuous circle where demand boosts productivity which in turn produces more growth. 

If there is a puzzle, it is why so much of the economic establishment  has neglected the demand side. When we have severe austerity, reduced economic growth but sustained employment growth, even if on the back of painfully low wages, it is simple arithmetic to see that productivity must suffer.

 

Geoff Tily is Chief Economist at the TUC. 

Tracey Thorn. CRedit: Getty
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“Not technically beautiful, she has an engaging laugh”: 35 years of being described by men

For women in music, being described most of the time by men is just par for the course.

I am sure you all saw the Twitter challenge that took off the other day – a request to women to “describe yourself like a male author would”, started by the writer Whitney Reynolds. There were thousands of hilarious replies, with women imagining how a bad male author would describe them. I thought about posting an example, but then realised, I didn’t have to imagine this. I’ve been being described by male journalists for more than 35 years.

Katy Waldman in the New Yorker wrote about the challenge, and how it highlighted clichés in men’s writing: “…prose that takes conspicuous notice of a female character’s physical imperfections. This is done with an aura of self-satisfaction, as if the protagonist deserves credit simply for bestowing his descriptive prowess upon a person of less than conventional loveliness.”

And oh boy, that hit home. Yes, I thought, that is precisely how I’ve been described, too many times to recall, so many times that I’ve actually sort of stopped noticing. The following aren’t direct quotes, but near enough.

“Not conventionally pretty, Thorn nevertheless somehow manages to be curiously attractive.” “Her face may not be technically beautiful but she has an engaging laugh.” “Her intelligence shines through the quirky features.” Often what’s irritating isn’t the hint of an insult, but just being wide of the mark. “She isn’t wearing any make-up” (oh my god, of course she is). “She’s wearing some kind of shapeless shift” (it’s Comme des Garçons FFS).

I’m not trying to arouse sympathy. I’m much thicker-skinned than you may imagine, hence surviving in this business for so long. But the point is, for women in music, being described most of the time by men is just par for the course.

A few weeks ago, when I was in Brussels and Paris doing interviews, I was taken aback all over again by the absence of female journalists interviewing me about my album – an album that is being described everywhere as “nine feminist bangers”. As the 14th man walked through the door, my heart slightly sank. I feel like a bore banging on about this sometimes, but it astonishes me that certain aspects of this business remain so male-dominated.

Even the journalists sometimes have the good grace to notice the anomaly. One youngish man, (though not that young) told me I was only the third woman he had ever interviewed, which took my breath away. I look at my playlists of favourite tracks over the last year or so, and they are utterly dominated by SZA, Angel Olsen, Lorde, St Vincent, Mabel, Shura, Warpaint, Savages, Solange, Kate Tempest, Tove Lo, Susanne Sundfør, Janelle Monáe, Jessie Ware and Haim, so there certainly isn’t any shortage of great women. I’ve been asked to speak at a music event, and when I was sent the possible line-up I couldn’t help noticing that over three days there were 56 men and seven women speaking. The final bill might be an improvement on that, but still. Any number of music festivals still operate with this kind of mad imbalance.

Is it down to the organisers not asking? Or, in the case of this kind of discussion event, women often feeling they don’t “know” enough? It’s a vicious circle, the way that men and their music can be so intimidating. The more you’re always in the minority, the more you feel like you don’t belong. Record shops seemed that way to me when I was a teen, places where guys hung out and looked at you like you didn’t know your Pink Floyd from your Pink Flag.

I also have to watch songs of mine being described by male writers, and sometimes misinterpreted. I’ve got one called “Guitar” on my new record. There’s a boy in the lyrics, but he’s incidental – it’s a love song to my first Les Paul copy. That fact has sailed over the heads of a couple of male reviewers who’ve seen it as a song all about a boy.

That’s the trouble, isn’t it? You miss things when you leave women out, or view female characters through the prism of their attractiveness, or when you take for granted that you’re at the centre of every story, every lyric. I bet you think this piece is about you. 

Tracey Thorn is a musician and writer, best known as one half of Everything but the Girl. She writes the fortnightly “Off the Record” column for the New Statesman. Her latest book is Naked at the Albert Hall.

This article first appeared in the 18 April 2018 issue of the New Statesman, Enoch Powell’s revenge