Letter: Productivity and a pounds 1-a-week nanny

Sir: Your front page reports the statement of the Director General of the CBI that public sector (and other) workers should get pay rises only when their productivity increases (9 September).

Conventional economics tells us that this is incorrect. For an efficiently functioning economy, gains in productivity must be spread in the form of higher wages throughout all sectors. The productivity of nannies and professional gardeners, for example, has probably hardly altered in the last 50 years.

Does Mr Davies believe that it would be sensible for him still to pay a nanny or gardener only a pound a week?

A 'going' rate of pay rises helps to make an economy both efficient and equitable.

Yours faithfully,

ANDREW OSWALD

Centre for Economic Performance

London School of Economics

London, WC2

9 September