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Could one reason for the productivity puzzle be low levels of employee engagement
In a recent speech Martin Weale, External member of the Monetary Policy Committee, posed an interesting challenge to those who are keen watchers of the UK’s return to growth. That challenge relates to the productivity puzzle, the way in which the economy is improving and yet individual productivity is no greater than it was six years ago.
Economists have long believed that there is a direct link between our standard of living and productivity. On a per-individual rate we currently produce five times as much in a year as we did in 1914 and this increase has been directly linked to an increase in our standard of living. In the recession productivity suffered but economists were expecting to see a rise in productivity levels as we returned to growth.
In his speech Martin Weale showed that the UK is not alone in showing a slower than expected upturn in productivity. In fact, of the 27 OECD countries 24 are in a similar position to the UK. The speech explored a number of areas including labour hoarding, capital allocation, investment and educational attainment but concluded that whilst the depth of the financial crisis is still casting a long shadow there is still insufficient evidence to provide a clear explanation of current productivity levels.
One area which Mr Weale didn’t cover within his speech is the current level of employee engagement which is also still generally at a low level. Taking steps to engage employees in the aims and values of the organisation can make a measurable difference to productivity, profitability and reputation. Organisations may have been bruised by the recession but employees too have been affected and it will take a concerted effort to bring their confidence and engagement levels back to where they were before. Perhaps then we will see the increase in productivity which will complete the economic puzzle.