Could Investment in Technology Close the Productivity Gap?

Kingly Brookes, June 8th, 2015

After years in the doldrums, we’re told that the UK economy is growing strongly again, with unemployment down and wages starting to rise in real terms. Unfortunately, behind this optimistic picture lies a problem which casts a shadow over future economic prospects – the country’s productivity remains stubbornly low.

In the 1990s and early 2000s, the UK’s productivity was markedly higher than Germany’s, but today it has fallen behind by about 30%. In other words, the average German worker’s time is a third more valuable than their British counterparts, a trend repeated in most modern economies.

This of course is largely down to the lingering effects of the financial crisis which wreaked such havoc on a UK economy overly reliant on financial services. Now that the crisis is largely behind us, how can productivity be increased to make the UK more competitive and boost its economy?

Put simply, productivity goes down every time a worker is engaged in activity which doesn’t contribute to the overall output of the country. A simple example: time spent battling outdated computer systems which are constantly down is time wasted; time that could be better spent actually working constructively.

To improve the productivity of the country as a whole, the barriers to individual productivity need to be broken down. This can be done by improving education and training, which better equips employees for their jobs, or by investing in heavy infrastructure such as the rail network to make the country as a whole operate more efficiently. Measures like these would undoubtedly improve productivity, but not immediately – the effects would take years or even decades to filter through the system.

One effort to boost productivity, which would have far quicker results, would be to invest heavily in technology, both in the public and private sectors. For example, investing in more efficient manufacturing technology could help businesses lower the costs of production per unit, immediately raising the productivity of its workers – and the profitability of the company overall.

Upgrading computer systems in office environments would reduce the amount of downtime caused by outdated, flaky systems that need nursing along, so more employee time would be spent working constructively rather than waiting for the tools of the job to be fixed. Likewise, IT departments would have more time to streamline processes and develop ideas that could move the organisation forwards, rather than constantly having to ‘fight fires’ keeping the old technology running.

There’s no easy solution to the thorny problem of low productivity, but it seems clear that investment in technology would bring immediate benefits, both to individual organisations and to the country as a whole.