Beyond the silver bullet approach to raising productivity

Featured Image: by Adam Marikar on Unsplash

Stephen Boyd
Economic Policy Unit, Scottish Government

The Scottish Government’s Economic Strategy (2015) recognises that “more productive economies can produce greater quantities of goods and services for a given set of resources, typically leading to higher incomes, living standards and wealth”. Raising the rate of productivity growth is not an end in itself but one of the means by which we can build a better society for all.

Indeed, it has been argued that ‘raising productivity is arguably the central economic challenge in the UK’ and the same might be said for Scotland. But experience suggests that raising the rate of productivity growth – significantly and durably – in any economy operating at or near the technological frontier is, to say the least, difficult. There are few (any?) examples of advanced countries achieving such an outcome.

Therefore the Scottish Government was delighted to learn about the launch of the Productivity Insights Network. In the past, the productivity debate has suffered from a narrow focus on ‘5 drivers’ (competition, enterprise, skills, investment and innovation) with insufficient attention paid to how these interact with each other and to the practical application of policy at workplace level. PIN’s interdisciplinary approach, emphasis on ‘insights’ and openness to ‘alternative and innovative ideas’ seemed particularly promising and very much in step with our thinking.

Following our attendance at PIN’s excellent 2019 conference and discussions with Prof Leaza McSorley, PIN lead researcher for Health and Wellbeing and Iain Docherty, PIN Infrastructure lead, a series of seminars was organised around the chapters in PIN’s forthcoming book Productivity Perspectives. The following seminars have taken place to date:

• Leaza McSorley – Inequality, Wellbeing and Inclusive Productivity Growth
• Kirsty Newsome and Tim Vorley – Contemporary Work, Employment and the Productivity Puzzle
• Iain Docherty and David Waite – Infrastructure and Productivity
• Colin Mason and Andrew Henley – Small Business Growth and Productivity

Over the next few weeks seminars will also be held with Philip McCann (Productivity Perspectives: Observations from the UK and the International Arena), Maria Abreu (Human Capital, Skills and Productivity) and Richard Harris (FDI, Capital and Investment Markets). Our hope and expectation is that the series will continue thereafter.

The seminars are providing an excellent opportunity to consider ways in which current research and analysis can help inform policies aimed at raising productivity growth in a manner that is consistent with the Scottish Government’s wider policy priorities on sustainability, wellbeing and fair work. All have stimulated much useful discussion and debate.

What have we learned so far?

First, policymakers want to engage! The seminars have generated a lot of interest from colleagues across all departments and grades of the Scottish Government. Colleagues want to learn about new research and analysis and how it might be applied to their areas of policy. It is, of course, helpful that PIN members are proving very adept at tailoring their presentations to a non-academic audience.

Second, the silver bullet fallacy – the belief that policy measures with the potential to send productivity skyrocketing are lurking somewhere just around the corner – is dying (if perhaps not quite dead). The presentations haven’t pretended to offer easy solutions to improve Scotland’s productivity performance or even suggest that such solutions might emerge in the future. Rather, taken together, PIN’s work indicates that raising the rate of productivity growth is a long term project requiring action across a range of policy areas, some degree of experimentation and recognition that effective policies are likely to be context-specific. This is far from a counsel of despair: PIN’s work is providing practically useful insights into developing and targeting new interventions.

Third, encouragingly, the emerging policy prospectus for productivity growth looks consistent with the Scottish Government’s wider policy agenda. As Leaza emphasised, fair work and inclusivity are not barriers to productivity growth but the means by which it might be achieved. It is difficult to see anything emerging from PIN that would support an agenda based on deregulation, cost minimisation and work intensification. This represents a significant, and from our perspective welcome, advance on pre-crisis approaches to productivity growth. Yet, as Kirsty and Tim concluded, we do require further “research on how the ‘fair work’ policy agenda relates to and can advance productivity outcomes”.

Finally, raising the rate of productivity growth in Scotland must be a continuous learning process through which Government will work with PIN and others and involve representatives of the businesses and workers whom we ultimately wish to become more productive. There must be room to experiment and learn from both successes and failures. Our seminars with PIN are proving a tremendous springboard for this new approach to productivity growth.

Most of the 21st century has witnessed a prolonged slump in productivity during which policy measures – particularly at UK level – have often returned to old standards such as tax cuts and initiatives to cut ‘red-tape’ which, unsurprisingly, have proved stubbornly ineffective. It is therefore exciting to observe the emergence of PIN and other ESRC funded research on productivity. We now have good reason to believe that our understanding of this complex issue will continue to improve and with it the prospects for developing effective policy. There also seems to be a growing awareness in the business community of the importance of raising productivity: despite the long-standing belief that businesses do not react well to initiatives framed around productivity, the response to the Productivity Clubs currently being piloted by the Scottish Government has been hugely positive. It is imperative that we build on this upsurge of interest.

PIN is proving itself to be a model of academic engagement and it is a pleasure to be working so closely with the team. The Scottish Government is excited about developing this relationship over the coming months: running future seminars and considering ways in which we might draw together PIN researchers’ work to practically support effective policymaking in Scotland. By doing so we increase the chance of making a tangible difference to long-term productivity growth and, in turn, improving the living standards and wellbeing of all Scotland’s people.

Find out more about the series here.