Home > Uncategorized > No, the UK labour market did not change my mind…

No, the UK labour market did not change my mind…

Let’s end the year with another look at the UK labour market. If it hadn’t been for a historical unique decline of labour productivity of around 5% the unemployment rate in the UK would have been about as disastrously high as in the Eurozone. The question is: what caused this productivity decline? Was it caused by a flexible labour market and lower unemployment benefits wich forced people to take low paid low productivity jobs they otherwise would have refused? If so, the UK system is a libertarian alternative to the ‘welfare state’! “Don’t care about demand and prosperity, just make people accept crappy jobs! That will teach them” (Aside – believe it or not but on the Mises blog you can find articles titled: Ebenezer Scrooge, Humanitarian“). Maybe that’s not a preferable alternative – but it is an alternative. At least when the decline of productivity is caused by institutional market factors and not by supply or demand. There may however be more ‘normal’ reasons why average productivity is going down. And it shows that sectoral developments are at least a large part of the historical indeed weird development of UK productivity. Differences between economic (sub-)sectors are unusually large (graphs). But they do follow familiar patterns. Everything connected with (rapidly declining) UK oil production is doing real bad. While the booming transport sector is, in true Schumpeterian fashion increasing productivity by leaps and bounds. Productivity is not going up or down because people accept crappy jobs – but becauseof  either new investments in growing sectors or idle capacity in some high productivity sectors.

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1112

Source: ONS

The manufacturing graph show the sectors of manufacturing which did worst and best, as well as the always quite stable food sector. The service graph shows the best performer as well as finance, which after real estate activities performed worst.

The strange thing about finance: while high productivity in other sectors is good for consumers, as stuff gets cheaper, high productivity in finance is actually bad for consumers as it reflects high fees and interest rates! To my surprise, administrative and supportive activities are the mirror image of finance, I do not have an explanation for this.

  1. February 10, 2014 at 10:14 am

    thank you

    مدير موقع عرب كول

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