The productivity puzzle continues to puzzle. It seems to be too puzzling for our politicians to talk about but lots of other people are on the case. Duncan Weldon wrote a piece earlier this week looking at both the economic and social factors.
This comment set me thinking:
It could be that the nature of Britain’s recovery explains the low productivity growth. Rather than lower productivity leading to lower real wages (as companies cannot afford to increase pay), it may be that lower real wages have encouraged firms to hire workers rather than investing in new equipment. This could have lowered productivity.
Where are Britain’s startups in all this? Entrepreneurs are supposed to come into the market and disrupt it, investing, innovating and bringing in new ideas which eventually improve productivity. At least, that’s the theory.
But there is little evidence that new firms are doing much to improve productivity. If anything…
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