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THE UK PRODUCTIVITY SHORTFALL IN AN ERA OF RISING LABOUR SUPPLY

Published online by Cambridge University Press:  19 February 2025

Andrew Benito  and
Garry Young Open the ORCID record for Garry Young [Opens in a new window]
Andrew Benito
Affiliation:
National Institute of Economic and Social Research, Dean Trench Street, London SW1P 3HE and IZA, Institute of Labour Economics, 53113 Bonn, Germany
Garry Young*
Affiliation:
Economic Statistics Centre of Excellence, Kings College London Melbourne House, Aldwych, London, WC2B 4PJ
*
Corresponding author: Garry Young; Email: [email protected]
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Abstract

Labour productivity stagnated in the UK in the period between the financial crisis and the emergence of Covid-19. Labour supply and employment grew strongly over the same period, driven primarily by net inward migration. While labour productivity should be independent of labour supply in the long run, this need not be the case in the medium run while capital per worker adjusts. Exploiting a range of evidence, we conclude that around 4 pp of the estimated 20% shortfall in productivity from its previous trend that had emerged by 2019 might be explained by increased labour supply, with a slowdown in TFP growth accounting for most of the shortfall.

Keywords

productivitylabour supplycapital deepeningD24E24E27J21O47
Type
Research Article
Information
National Institute Economic Review , First View , pp. 1 - 18
Copyright
© The Author(s), 2025. Published by Cambridge University Press on behalf of National Institute Economic Review

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