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The Uk Productivity Shortfall In An Era Of Rising Labour Supply

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Listed:
  • Benito, Andrew
  • Young, Garry

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.

Suggested Citation

  • Benito, Andrew & Young, Garry, 2024. "The Uk Productivity Shortfall In An Era Of Rising Labour Supply," National Institute Economic Review, National Institute of Economic and Social Research, vol. 270, pages 25-42, November.
    • Handle: RePEc:cup:nierev:v:270:y:2024:i::p:25-42_2
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    JEL classification:

    • J11 - Labor and Demographic Economics - - Demographic Economics - - - Demographic Trends, Macroeconomic Effects, and Forecasts
    • J21 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Labor Force and Employment, Size, and Structure
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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