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Dissecting the Productivity Puzzle
The United Kingdom, once renowned for its robust economic stability, now faces a seemingly insurmountable issue: a stagnant productivity growth, or what economists widely term as the “productivity puzzle.” This challenging riddle presents itself as a primary cause for concern, specifically since the devastating financial crisis of 2008. As a result, the UK’s economic machinery has been running on a wheel of perpetual crises, seemingly without an end in sight.
Productivity, defined as the economic output generated per hour of work, forms the bedrock of any nation’s economic framework. It is the lifeblood that ensures a healthy GDP growth, and its augmentation can only be achieved either by increasing the volume of work hours or population expansion. For any nation, an upward trend in productivity serves as a key indicator of its economic health, justifying Paul Krugman’s assertion that “productivity isn’t everything, but in the long run, it’s almost everything.”
Prior to 2007, the UK exhibited a promising and upward trajectory in productivity growth. If that trend had persisted, productivity today would be approximately 16% higher. This increase would translate into significantly improved living standards for the population, creating a ripple effect of economic…
