London productivity arguably rests on a four legged stool of superfast broadband, decent public transport, affordable housing and clean air to breathe. Why can’t politicians get their brain in the game on this?
Meanwhile, according to the OECD, after making adjustments for purchasing power parity between countries, the growth in output per head in the five years ending 2015 was 19% for Germany, 18% for USA, 17% for Japan and the entire Eurozone, 10%. In the same study, the UK managed a mere 9%!
People can argue about the data, the method or the way output is valued. In any case, there’s no point blaming the capital versus income taxation regimes for poor national productivity, if both taxes are being widely flouted by big corporates, in favour of tax havens, while lobbying to offset capital investment or job creation with special tax breaks. Physical and intellectual capital investment reduces corporate performance in the short term which then reduces bonuses, isn’t so relevant (as a reason) either, if much of the capital investment (both types) happens in university labs. Or is commercialised off the back of them.
Management decisions that shed labour cost, rather than investing to make the same labour more productive, might explain the relative OECD productivity measures in Germany versus the UK in the above figures. However, since productivity for the EU as a whole (with consistent labour laws) is very similar to the UK, it probably isn’t the main explanation.
There’s also the output valuation issue – how to best measure productive output, if the resulting output value doesn’t necessarily accrue to the invention developer. Perhaps nations wanting to boost productivity, need to publicly reward inventors by waiving their income tax payable? Productivity may continue to be elusive on every level. The race is on, not just to improve national productivity, but even to understand it.