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John Mann MP: Insecure, unstable employment is the real cause of our hamstrung economy

4 min read

A culture of work that relies on zero-hours contracts, rather than up-skilling workers, is the reason for stagnating productivity levels, says John Mann MP.

Nobel-prize winning economist Paul Krugman famously said that “productivity isn’t everything, but in the long run it is almost everything”. If he was right, then the latest ONS figures on the productivity of the British economy should concern us greatly.

Right now, Britain is just one quarter away from having recorded no productivity growth in the last decade. That’s a decade of wasted opportunity to boost living standards and to show that Britain is truly an industrial leader in the world.

Economic recoveries in other nations have seen productivity begin to catch up with its pre-crisis trend. However, in Britain whilst other economic indicators have shown some signs of recovery, productivity still lags well behind. If productivity had grown in line with projections after 2007, it would now be 20% higher than it is.

For years, the Bank of England have been obsessing over explaining the “productivity puzzle”. Whilst they are right to point to economic theory and issues with measuring the data, even by their own admission, their explanations leave much to be desired.

The missing explanation for our lagging productivity is a culture that focusses on meeting short-term business needs rather than investing properly in long-run development.

Economists are often tempted to put a failure to boost productivity down to a failure to invest sufficiently in ‘physical capital’; for instance, a company choosing to repair ageing, slow machinery rather than invest properly in new, faster machinery.

Few, however, have properly examined the impact of human capital investment on productivity. Many firms now have a culture of work that fails to invest properly in the skills and development of their workers. Instead of a culture of stable, dependable employment where firms focus on up-skilling their workers to retain their knowledge and ideas, too many firms have now turned to the zero-hours contract to meet daily staffing requirements.

Insecure, unstable employment is the real cause of our hamstrung economy. Workers who cannot depend on a regular wage from week to week know their employer feels no loyalty to them, and feel no loyalty to their employer in return. With both parties able to walk away at a moment’s notice, employers feel no need to invest in the technical and professional development of large numbers of workers. Employees whose work is based on tenuous contracting feel no obligation to invest in developing their own technical skills.

Contrast this with Germany, where productivity per worker is 27% higher than in the United Kingdom. German industry knows the importance of developing technical skills and fostering innovation and personal fulfilment in the workplace. The German Mittelstand and its high-skilled manufacturing industry are world-leaders in employee retention and workplace training. 

In the UK, steps have been taken to address issues surrounding the security of work. The Taylor Review of Modern Working Practices unambiguously recognised the importance of good, secure work for all. Addressing our productivity problems means taking contract security, workplace training and professional development seriously.

Addressing job security gives our firms and workers the certainty they need to make proper investments in skills. Developing these skills in firms allows knowledge to accrue, processes to be improved and gives British firms the opportunity to lead once more.

If productivity really is almost everything, then a solution to the productivity puzzle must be arrived at urgently.

My solution to the puzzle is to value workers properly. Giving them security of tenure and moving away from almost infinite labour market flexibility gives workers and firms the incentive to invest properly in skills. This way, our workers can truly become our firms’ most valuable asset and our firms can be at the cutting edge again.

Getting the best from our workers boosts our economy, our industry and will give a welcome boost to the living standards of ordinary people. 

John Mann is the Labour Member of Parliament for Bassetlaw

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Read the most recent article written by Lord Mann - Lords Diary: Lord Mann


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