Paying for political promises

In the UK, we have been through a rather exciting General Election – though as I write this, we have the same government and the same Prime Minister.

In their campaigns, all parties made us promises – of what they would do and deliver – better health care, more jobs, lower taxes, etc.

How would they pay for those promises that cost money- by raising taxes or cutting costs elsewhere.  (Oh yeah, that’s going to happen!)

But how many of the parties mentioned the only real way of paying for the promises – higher productivity.

You guessed it … not one of them.

If politicians looking for solutions don’t realise that productivity is the answer – what hope is there?

Exhortation is not enough

Many nations have realised that the only true long-term key to economic growth is productivity improvement.

The problem is that this realisation is often the end, rather than the start, of the matter.  Governments and their agencies exhort commerce – and perhaps even the population – to improve productivity and to compete – but without understanding their role in making this happen.

Exhortation and hectoring are not enough.  Governments need to provide infrastructure, skills, information and advice – in ways that are accessible – just in time, at just the right level – and at the right cost!

Its not rocket science – but it isn’t easy either!

Robots on the march again

I’ve referred to the subject (threat?) of robots several times in the last year.

Clearly they (robots) are going to have a big impact on many companies and on many people’s jobs – but exactly how, in what ways ,is not yet clear. For some time humans and robots are likely to be co-workers. Skilled workers will survive the longest.

Views on this subject vary – but sometimes writers seem to be scaremongering rather than making reasoned assumptions and predictions. As ever, we will have to wait and see.

However, my reading in this area did throw up a word I wish I had coined - robopocalypse.

A little bit moody

Global rating agency Moody’s Investors Service sees a persistent decline in labour productivity growth, stemming from an ageing population and slow investments, as posing a key threat to global economic recovery.

The agency’s report, titled “Collapse of Global Productivity Growth Remains Sizable Risk to Credit Conditions,” published last week said global labour productivity growth fell to an average 1.7% in the post global financial crisis years of 2011-2015, compared to an average 2.6% between 1995-2007, Moody’ reported.

In 2016 alone, labour productivity growth slowed to just 1.2%. Moody’s said if productivity growth remains unchanged, global economic growth next year might be as low as 2.5%, significantly lower than previous estimates of 3.5%.

What are we doing about it?  What can we do about it?

Robots are not the ansswer

The last 2 decades have sen the inexorable rise of the robot – especially in motor manufacture.  We have all sen the robotic arms lifting and fitting panels, spray painting, and so on.  Some workers have presumable been displaced  - but the economic gains have been substantial, surely.

Well ,thisc rise of †he robot has been matched with the lowest productivity growth in recorded times.

Coincidence or causal relationship?

Well, there is some evidence that those displaced workers have had to take low paid, possibly part-time work – not the high skill jobs that were predicted.  And, worse – some could find no alternative work at all – the jobs are in the wrong place!

So, the rise of the robot might be good only for those who make and sell robots.  Or perhaps it simply takes time  for society to adapt to such a massive change.

Knowledge is not enough

In the developing world, education standards have been rising for decades.  More and more of the population go to university and the number of degrees, and even higher degrees, rises relentlessly.

Yet, still employers maintain – as they always have done – that they cannot get employees with the right skills.

Note the word ‘skills’.  Employers don’t want more knowledge – that is easy to provide via Google – but skills are both expensive to provide -and take a long time to develop.

This means that the ‘education’ system must become more of an ‘education and skills’ system and skills must receive parity of esteem with knowledge.

In the UK, the proposed ‘T levels’ might help – but past initiatives have failed to change the ‘esteem’ with which skills are held. Teachers are knowledge-based – the wrong people to guide kids through a skills-based curriculum.  Changing this will take perhaps a couple of generations, helped by kids’ increasing reluctance to take on the massive loans to fund university attendance.

But, of course, employers must play their part – by reducing their reliance on the degree as a ‘first sift’ of job applicants -and recognising skills where they exist.

It doesn’t end with automation

Japan has a highly automated industrial sector which has fuelled productivity growth over several years. However this efficient sector is only a pat of the Japanese economy (though an important part) and the rest of the economy – and especially the services sector has a very poor track record – relying on long hours of hard work to get things done, rather than streamlined processes and procedures.

The lesson is that you need to make improvements where they have maximum impact, not where they are easiest to make.

Productivity and Trump’s Tax Turnoff?

Donald Trump is hailing his tax cutting plans as ‘radical’ and likely to stimulate US growth.How will they affect US productivity?

Well, the way in which productivity responds to trade measures is not clear … but if corporations are paying less tax, they may spend more on capital infrastructure or on R&D – and both of those are generally beneficial to productivity.  However, they take time to show up in the figures – so don’t expect short term productivity gains.  And with long-term investments, often something else (some short term effect or expediency) often intervenes.

So, as ever, we wait and see.  We hope.  And if it all works our, we might have to hail Trump as a visionary.

Should we encourage laziness?

Is laziness helpful in making people more productive? does it encourage them to seek less arduous ways of achieving the same output?

Well, certainly the opposite is not true  Busyness is not a sign of high productivity. Too many people are busy but essentially unproductive – because they are either doing the wrong things or doing them in the wrong way.

Think about people like maintenance engineers – ideally we want them either doing nothing or carrying out planned maintenance – we do not want them working on breakdowns and emergencies.

So, perhaps we should encourage people to create more ‘idle time’ as a reward for improving how they carry out their own tasks

IMF has got it right

The head of the International Monetary Fund, Christine Lagarde, has issued a stark warning that living standards will fall around the world unless governments take urgent action to increase productivity by investing in education, cutting red tape and incentivising research and development.

Whether or not, you agree that her prescription is what is needed to improve productivity – or is complete, it is good that someone so influential is spreading the message about the need for productivity development.

I actually think she has got it mostly right – I would add infrastructure development, and would add training to education … but her summary is pretty effective and ‘chimes’ quite well with the findings of the recent World Productivity Congress.