December 17, 2013
That may not have been his intention, but when you boast about an economy with 30 million employed workers generating 60,000 jobs a month, with a GDP growth rate of 1.9 percent, then you’re boasting about negative productivity growth. Back in the days when arithmetic mattered in economic policy, people might have pointed out that job creation of 60,000 a month implies annual employment growth of 2.4 percent. Assuming no changes in average hours worked, this means that productivity in the U.K. is shrinking at 0.5 percent annual rate. Osbourne’s course will have make the UK poorer than Sub-Saharan Africa in a few hundred years.
Of course in a country with large amounts of unemployment and underemployment, like the UK, low productivity is not a bad thing. It allows people to work who would not otherwise have jobs. However it hardly seems cause for the boastful sounding column Osborne had on the WSJ op-ed page. On its current path the UK will just be passing its 2007 level of output some time next year. The IMF projects that the UK will not exceed its pre-crisis GDP on a per capita basis until 2018. In the land of sharply diminished expectations this may look like a great success, but it looks pretty pathetic to people familiar with economic data and history.
Note: number of job holders corrected.
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