What is the productivity puzzle?
Productivity, as a measure of output, regularly fluctuates – especially when economies boom and bust. The 2008 financial crisis stands out as a particularly memorable bust, both because of its scale and its impact on productivity.
In a nutshell, productivity in the UK and beyond has flatlined in the 10+ years since the crisis. This hasn’t happened in the post-war era, ever. For context, Britain’s productivity growth during the 2010s was the worst it had been since the start of the Industrial Revolution.
In the four decades up to 2008, UK productivity grew at a rate of more than 2% per year. In the years since it has been around a third of that. The impact this has and continues to have on the UK, its businesses and people is huge.
Because economists are left baffled when looking for explanations for the slowdown in productivity growth, it’s often known as the productivity puzzle. The productivity crisis is another popular name for it.