| Productivity is the output recorded per hour worked by the workforce. Successful manufacturing nations like Germany boast high levels of productivity. There is a positive correlation between high levels of productivity and high GDP per capita – so it is evidently something desirable. But we shouldn't get obsessive about it – for reasons I shall explain.
The conventional wisdom is that the main reason why wage growth has stalled in the UK is that the growth of productivity in the UK has declined. As we know, the Office for Budget Responsibility (OBR) revised downwards its estimates for the growth of productivity going forward in November. The realistic sustainable growth rate in the UK economy was revised down to just 1.5 percent per annum. This had massive knock-on effects for projections for the government's finances, as revealed in Mr Hammond's budget of 22 November. The long-term trend growth rate for the UK until the financial crisis of 2008 was 2.4 percent. To move from 2.4 percent to 1.5 percent may not sound dramatic: but it is the difference between getting government finances back into good health and falling into an ever-deepening pit of debt. | 
