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debtlessmanc

Bank Of England 'puzzled' By Productivity Gap

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http://www.bbc.co.uk/news/business-27857472

apparently productivity is 16% below the crash level and the Bank of England is at a loss to explain why....

any knowlegable HPC want to express an opinion?

I'm going to guess it is because the data sources and statistical method is out of date, so the best solution would be to change the way productivity is calculated. Shouldn't be too hard to tweak the formulae to get it back up or above 2007-8 levels.

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my guess is that all the "new" jobs are from manual workers in shops...these people used to work in highly efficient jobs in offices and banks.

plus some will need two jobs to acheive the same productivity.

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I think it’s in volume 1 of Capital that Marx says that, in every crisis, there comes a point where the capitalists must attempt to drive the wages below the labourers cost of reproducing their labour-power– hence the growth of the working poor in the US [and other advanced countries], temporary jobs, “mini-jobs” etc....

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http://www.bbc.co.uk/news/business-27857472

apparently productivity is 16% below the crash level and the Bank of England is at a loss to explain why....

any knowlegable HPC want to express an opinion?

Because negative real interest rates destroys productive behaviour.

It's breathtaking that the BofE don't "understand" this.

Edited by SleepyHead

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Guess what - if you slash people's wages they really can't be ar5ed.

I'm amazed Andy Haldane doesn't know though. He knows everything.

Edited by R K

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Guess what - if you slash people's wages they really can't be ar5ed.

just the same as devaluing their pay in a serious inflation.

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Guess what - if you slash people's wages they really can't be ar5ed.

I'm amazed Andy Haldane doesn't know though. He knows everything.

I recall you calling it a puzzle as well, just a while ago.

Then again, I find it puzzling where your wage-inflation in this situation comes in. Unless in public sector, by getting rid of the dross, and bringing up good workers wages to the market level. In theory. However it's already at the market level and above (with other benefits), for the dross and the good - imo.

Well, I was counting from the Great Reflation around March '09 since when nominal wages have risen from 140 to 150 more or less on the AWE index.

I'm not really sure why everyone measures everything from the 'peak' prior to the GFC but accept that it looks worse from there.

My main point was that nominal wages aren't 'falling' but have been rising for the last 5 years. Clearly they need to rise further and faster notwithstanding this bizarre productivity puzzle (which must surely be a glitch somewhere in the data feed).

Agree re public sector. Appalling and a pretty stupid thing to do in the first place during a depression.

Edited by Venger

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I recall you calling it a puzzle as well, just a while ago.

Then again, I find it puzzling where your wage-inflation in this situation comes in. Unless in public sector, by getting rid of the dross, and bringing up good workers wages to the market level. In theory. However it's already at the market level and above (with other benefits), for the dross and the good - imo.

And your point is?

Nominal wages are rising. De facto.

Real wages will/are lagging. We'll have to see if/how long that continues. I'm guessing not as long as some people expect, but data will tell us as the boomlet unfolds.

Edited by R K

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And your point is?

Well as you asked, I'll look again, and see then you wrote wages have risen, and now they're slashed?

My point was to wonder whether you have any other suggestions about this productivity puzzle, other glitch in the datafeed - for I don't understand it myself, other than suspicion it's deflation taking hold.

I'm with this, with extra motivation of reading posts of landlords projecting x50 HPI in next 50 years, and posts about how older owners can't downsize from £1m homes because of £40K in fees, and motivation of Osborne/Balls that ever higher house prices all about not building enough.

Because negative real interest rates destroys productive behaviour.

It's breathtaking that the BofE don't "understand" this.

Nothing motivates me like the thought of never being able to buy a family home like I grew up in, but with the added bonus of being set against a background of rising food & fuel prices and falling wages. Tony Robbins, eat your heart out.

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Maybe there isn't the demand for widgets that there once was? The overcapacity is being gradually reduced in some sectors though. Other areas eg. infrastructure in particular the roads , power generation suffering from underinvestment which will limit future production.

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My vote goes for the self unemployed and the fact that prior to the CC the state had a monopoly on none jobs and now the public sector has jumped in. I fail to believe that a zero hours contract can be as productive as full time. Two or three zero hour employees doing one full timers job.

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Because negative real interest rates destroys productive behaviour.

It's breathtaking that the BofE don't "understand" this.

Bingo. 'Free' money (for the insiders) coupled with a rising cost of living and falling wages (in real terms) plus ultra low interest rates for savers, disincentivises the notion of producing things/working and encourages people to borrow and speculate.

Edited by Sour Mash

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Well as you asked, I'll look again, and see then you wrote wages have risen, and now they're slashed?

My point was to wonder whether you have any other suggestions about this productivity puzzle, other glitch in the datafeed - for I don't understand it myself, other than suspicion it's deflation taking hold.

I'm with this, with extra motivation of reading posts of landlords projecting x50 HPI in next 50 years, and posts about how older owners can't downsize from £1m homes because of £40K in fees, and motivation of Osborne/Balls that ever higher house prices all about not building enough.

Are you stalking me?? Please don't.

Nominal wages have been rising. Real wages have been falling. Not sure which bit of that is difficult to grasp.

Here's the horse's mouth. They think it's partly the fall in North Sea oil output, partly 'measurement issues' (lol), a goodly chunk of lack of capital investment i.e. we're de-skilling basically and about half is 'haven't a clue'. Fill your boots.........

http://www.bankofengland.co.uk/publications/Documents/quarterlybulletin/2014/qb14q201.pdf

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http://www.bbc.co.uk/news/business-27857472

apparently productivity is 16% below the crash level and the Bank of England is at a loss to explain why....

any knowlegable HPC want to express an opinion?

Because 'productivity' is not a static thing? you have to keep investing in order to maintain the same level of productivity.

E.g. if you don't replace your clapped-out Transit van, it will require more and more maintenance, break down more often, etc... so your productivity goes down the pan.

The above is not - of course - a complete answer because some productivity gains can be made without capital investments (e.g. if you notice, through careful analysis of the user manual, that you've been sending that Transit van for maintenance twice as often as what's actually required :)). But there's still a very strong correlation between investment and productivity.

The minor problem that we have at the moment, is that bricks'n mortar are a far better investment than productivity gains.

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I suspect that shovelling capital into failed entities such as RBS, BOS etc to bail out the City when it's clear that banks destroy capital at an almost unimagineable rate is also a significant factor.

Of course the BoE/govt. don't want to admit this since saving the City at the expense of productive investment elsewhere has been their main strategy. It suits them to be 'puzzled' and churn out theoretical papers full of 'mights' and 'coulds'.

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Once the burning question of the time was how many angels can dance on the head of a pin- today it's 'productivity'. But since both the nature of angels and the definition of productivity are so subjective the answer depends on who's asking the question and what they have to gain by the answer.

For example the vast amount of work done by women in the home environment is arbitrarily excluded from GDP because it's considered too hard to measure accurately- so such trivia as childcare is not considered to contribute to the nations prosperity? :lol:

So the reality is that 'productivity' is not some objective measure of truth, it's just another political tool to be deployed at need.

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Not enough bankers bonuses?

Correct! High-paying bubble jobs in banking, insurance, housebuilding have been lost forever and replaced largely with low-paying jobs in retail, customer services etc. Self-employment, zero hours and NMW are also obviously a factor. There's no mystery. These losses would have been far greater without Osborne's intervention, so there's lots more downside to look forward to.

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