Are we missing the point about productivity?

A number of news stories have caught my eye in recent weeks. All of them refer to the UK’s ‘Productivity Puzzle’ – the paradoxical situation that, despite increased employment levels since the 2008 financial crisis, the country’s productivity (the amount of work produced per working hour) is barely growing.

Advisory & Impact

Why does this matter? Quite simply, because productivity is a major factor in driving economic growth and higher standards of living.

So why is it happening? Much of the public discussion focuses on the fact that more people are becoming employed than in previous years, but the proportion going into jobs that aren’t very productive is much higher than we need for overall productivity to grow (food and drink services being the oft-quoted example here).

That’s certainly true, but it only scratches the surface of the issue. Research by Bates Wells Advisory and Impact provides valuable insight into what is going on, and that there is a huge potential for additional productive value creation in the UK. Looking at the problem through the lens of skills is the key to unlocking that potential.

Our current skills system is not much changed since the days when children left school, entered their chosen profession and pretty much stayed there. But that is not the world we live in today. Ours is a world in which diminishing numbers of workers stay in the same field for the whole of their working lives, and most will need to develop additional skills or re-train at some future point. Portfolio careers – once seen as something rare and exotic – are commonplace. Part time and flexible contracts are a standard offering. Digitisation and technical advances are changing the nature of work at a rate it’s hard to keep pace with. Added to that, our workforce is an ageing one, and we can’t necessarily expect older workers to stay in physically demanding jobs until retirement (which itself is happening at a later age). Our skills system is not designed to cope with all that. Policy changes and new delivery models do little more than scratch the surface – they are bolt-on solutions to a system that needs a radical re-think.

The fundamental problem at hand is that we think about skills in the wrong way. Some of the most fundamental skills needed in today’s workplace have to be developed and viewed as portable assets that can support worker mobility, not as tools developed for a particular job or inextricably situated in only one industry. Plumbers need to think of themselves as problem solvers, not just as fixers of leaks; teachers can make use of their coaching and communication skills in other walks of life; data inputters often have a keen eye for detail and a flair for spotting patterns and anomalies.

Alarmingly, employers are also reporting a dearth of skills that are critical in any industry: the ability to make decisions in data-rich environments; leadership; flexibility and adaptability; agency and self-management – to name but a few. Rarely are these taught routinely in schools or deliberately maintained in the workplace. Opportunities to develop these and other critical skills become scarcer, and often less well-respected by employers, the further on in your career you are. Yet it’s these skills that are seen to be having a particularly detrimental effect to UK productivity. In failing to develop them and value them appropriately, we are setting a course for under-achievement overall, because it is these skills which equip businesses to thrive and gain advantage in today’s markets.

In the absence of suitably skilled workers businesses are forced to make radical strategic choices – often lowering the value of their output to match the capabilities of the workforce available. Inevitably this leads to a ‘low skills equilibrium’ – the state where there is full employment but the majority of the workforce is in low-paid occupations which offer no incentive to upskill. It’s a vicious circle which can only be broken by taking radical action.

Our research, which contributed to the independent Commission on Sustainable Learning for Work, Life and a Changing Economy, (see here for the addendum) shows that if the average skill level of the UK workforce increased to a point level the OECD top quartile countries, and if the average skill levels sought by employers increased (2 million more highly skilled jobs created, and 1 million more intermediate skilled jobs) this could lead to £22bn in additional value per year to the UK economy.

That’s certainly a prize worth having, and it’s one we can win – if we recognise that the productivity puzzle can only be solved with the help of a skills system that is designed for today’s world of work.


This information is necessarily of a general nature and doesn’t constitute legal advice. This is not a substitute for formal legal advice, given in the context of full information under an engagement with Bates Wells.

All content on this page is correct as of April 30, 2019.