High productivity or low unemployment? You can't have both

It is no coincidence that in Britain we take five days to produce what French workers get through in four

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The Independent Online

Reports that the French energy company EDF is gearing up for a fight with its employees over an attempt to reduce their 10-week holiday entitlement were greeted on this side of the Channel by the usual tut-tutting about the French economy. We had a field day condemning the “feather-bedding” enjoyed by French workers and boasted for the umpteenth time of the UK’s obvious superiority in the matter of “the market” that explained why so many young French people come to London to seek their fortune – or even just a job.

There was, however, something missing from most of these reports. It became a bit of a sub-theme during the UK election campaign: French productivity, taken nationally, is a good 20 per cent above ours. We generally take five days to produce what they get through in four. If you look at it like this, the EDF workers have earned their long breaks. Indeed, you could argue that it is other French workers, with shorter holidays, who are exploited.

It is also worth noting that the long holidays enjoyed by EDF workers and others did not come about just because the French were being French. They were a perverse by-product of the statutory 35-hour week introduced in 1999. In some sectors – power, transport and, yes, hospitals – it was recognised that a 35-hour week was impractical. So they totted up the hours, added a bit, and came up with longer holidays. Maybe UK workers could take more time off for the same salary if they worked, when they worked, to greater effect. 

You can observe the difference the moment you cross the Channel. To risk a broad generalisation, when the French work, they work; and when they play, they play. There seems to be less waiting around; fewer nurses gossiping in side rooms, for instance (taking needed respite from their 12-hour shifts); fewer waiters per 30 diners than you would find in most UK (and especially US) establishments.

To risk another generalisation, their tools are often a notch above ours, too. Look at a French road crew resurfacing a motorway by night; then look at the dim lights and near-manual tarmac spreaders at the disposal of their UK counterparts. Superior levels of investment and the more concentrated French working style could help explain some of the gap between our productivity and theirs.

But how much they explain is the subject of fierce debate. Politicians, economists, and even the head of the Bank of England all identify low productivity as a grave hindrance to economic growth, but are at odds about precisely why, and what to do about it.

All that most of them agree on is that non-experts, such as myself, are quite wrong to cite the number of incoming workers, both from the EU and under the non-EU quota, as contributing to low productivity. Their view is that people come here because there are jobs; they are not hired as cheap labour. But even if this is true, it is hard to see how plentiful labour does not in some way depress investment that would foster higher productivity. If labour were scarce, and/or more expensive, employers would invest more in automation, and productivity, as conventionally calculated, would rise.

What is happening in the UK, however, is not only down to economics. Successive British governments have made choices – especially during and after the financial crisis – that resulted in the creation of many lower-paid jobs rather than fewer higher-paid jobs. Low pay was offset by tax credits.

The choice to keep unemployment down was entirely defensible, even laudable, but it was a choice. And choosing more jobs at lower pay went hand in hand with lower skills and lower productivity. Many Continental countries, including France, have chosen policies that produce fewer, but better (paid or protected) jobs. The consequence is higher productivity, but higher unemployment, too.

Now it may be that there is some way of obtaining the best of both worlds: the UK employment levels of today, with French or Scandinavian levels of social protection and pay – and their levels of productivity, too. This is what those who strive to solve the UK’s low productivity “conundrum” are looking for. Higher productivity, they say, is the key to accelerating economic growth and higher living standards for all; the alternative is, at best, stagnation.

And perhaps they are right. Perhaps you do not have to choose between a low-pay/low-productivity/high-employment economy and the opposite. Perhaps you can combine high levels of employment with high productivity in an advanced economy. But maybe you can’t – and if you can’t, more joblessness is not the only danger that lurks in a fixation with high productivity. 

There are sectors where more people may be needed. Take the NHS (GP surgeries and hospitals) or universities. It is rare for me to visit either and not return frothing at the mouth at the inefficiencies and glaring wastage all around. Unless offset by staff cuts elsewhere, however, putting more nurses on wards – as is current policy – will reduce productivity. Ditto seven-day staffing; or, in higher education, competing – on class sizes – for students. Yet all such desirable improvements will result in a decline in productivity. 

Or take supermarkets. France manages without self-service checkouts. Have these hated machines increased productivity? And even if they have, at what cost to the goodwill and general contentment of customers? Especially in services, as Ryanair has discovered, the quality of experience counts. Higher productivity, as currently measured, may not always be a useful gauge. There are circumstances where more may indeed be better.

Of course, the UK has room for improvement. Inefficiency, poor management and lack of investment are besetting ills. But pursuing productivity to the exclusion of all else won’t solve these problems by itself, and not all low productivity is bad. If numerical comparisons are to mean anything, it should be recognised that high-quality service needs a different sort of measure.

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