“Stop worrying about hairdressers”: The UK government has misdiagnosed its productivity problem

We’re going as fast as we can, here. Image: Getty.

Gonna level with you here, I have mixed feelings about this one. On the one hand, I’m a huge fan of schadenfreude, so learning that it the government has messed up in a previously unsuspected way gives me this sort of warm glow inside. On the other hand, the way it’s been screwing up is probably making the country poorer, and exacerbating the north south divide. So, mixed reviews really.

Here’s the story. This week the Centre for Cities (CfC) published a major report on Britain’s productivity problem. For the last 200 years, ever since the industrial revolution, this country has got steadily richer. Since the financial crash, though, that seems to have stopped.

The standard narrative on this has it that the problem lies in the ‘long tail’ of unproductive businesses – that is, those that produce less value per hour. Get those guys humming, the thinking goes, and the productivity problem is sorted.

But the CfC’s new report says that this is exactly wrong. The wrong tail: Why Britain’s ‘long tail’ is not the cause of its productivity problems (excellent pun, there) delves into the data on productivity in different types of businesses and different cities, to demonstrate two big points.

The first is that the long tail is the wrong place to look for productivity gains. Many low productivity businesses are low productivity for a reason:

The ability of manufacturing to automate certain processes, or the development of ever more sophisticated computer software in information and communications have greatly increased the output that a worker produces in these industries. But while a fitness instructor may use a smartphone today in place of a ghetto blaster in 1990, he or she can still only instruct one class at a time. And a waiter or waitress can only serve so many tables. Of course, improvements such as the introduction of handheld electronic devices allow orders to be sent to the kitchen more efficiently, will bring benefits, but this improvements won’t radically increase the output of the waiter.

I’d add to that: there is only so fast that people want to eat. There’s a physical limit on the number of diners any restaurant can actually feed.

At any rate, the result of this is that it’s stupid to expect local service businesses to make step changes in productivity. If we actually want to improve productivity we should focus on those which are exporting services to a bigger market.  There are fewer of these, but the potential gains are much bigger. Here’s a chart:

The y-axis reflects number of businesses at different productivities, shown on the x-axis. So bigger numbers on the left are bad; bigger numbers on the right are good. 

The question of which exporting businesses are struggling to expand productivity is what leads to the report’s second insight:

Specifically it is the underperformance of exporting businesses in cities outside of the Greater South East that causes not only divergences across the country in wages and standards of living, but also hampers national productivity. These cities in particular should be of greatest concern to policy makers attempting to improve UK productivity overall.

In other words, it turned out, again, to the north-south divide that did it. I’m shocked. Are you shocked? This is my shocked face.

The best way to demonstrate this shocking insight is with some more graphs. This first one shows the distribution of productivity in local services business in four different types of place: cities in the south east (GSE) in light green, cities in the rest of the country (RoGB) in dark green, non-urban areas in the south east in purple, non-urban areas everywhere else in turquoise.

The four lines are fairly consistent. The light green, representing south eastern cities has a lower peak on the left, meaning slightly fewer low productivity businesses, but is slightly higher on the right, meaning slightly more high productivity businesses. In other words, local services businesses in the south eastern cities are more productive than those elsewhere – but the gap is pretty narrow. 

Now check out the same graph for exporting businesses:

The differences are much more pronounced. Areas outside those south eastern cities have many more lower productivity businesses (the peaks on the left) and significantly fewer high productivity ones (the lower numbers on the right).

In fact, outside the south east, cities are actually less productive than non-urban areas. This is really not what you’d expect to see, and no a good sign for the health of the economy:

The report also uses a few specific examples to illustrate this point. Compare Reading, one of Britain’s richest medium sized cities, with Hull, one of its poorest:

Or, looking to bigger cities, here’s Bristol and Sheffield:

In both cases, the poorer northern cities are clearly lacking in high-value exporting businesses. This is a problem because these don’t just provide well-paying jobs now: they’re also the ones that have the potential to make productivity gains that can lead to even better jobs. The report concludes:

This is a major cause for concern for the national economy – the underperformance of these cities goes a long way to explain both why the rest of Britain lags behind the Greater South East and why it performs poorly on a

European level. To illustrate the impact, if all cities were as productive as those in the Greater South East, the British economy would be 15 per cent more productive and £225bn larger. This is equivalent to Britain being home to four extra city economies the size of Birmingham.

In other words, the lesson here is: stop worrying about the productivity of hairdressers. Start worrying about the productivity of Hull.


You can read the Centre for Cities’ full report here.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites

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The IPPC report on the melting ice caps makes for terrifying reading

A Greeland iceberg, 2007. Image: Getty.

Earlier this year, the Intergovernmental Panel on Climate Change (IPCC) – the UN body responsible for communicating the science of climate breakdown – released its long-awaited Special Report on the Ocean and Cryosphere in a Changing Climate.

Based on almost 7,000 peer-reviewed research articles, the report is a cutting-edge crash course in how human-caused climate breakdown is changing our ice and oceans and what it means for humanity and the living planet. In a nutshell, the news isn’t good.

Cryosphere in decline

Most of us rarely come into contact with the cryosphere, but it is a critical part of our climate system. The term refers to the frozen parts of our planet – the great ice sheets of Greenland and Antarctica, the icebergs that break off and drift in the oceans, the glaciers on our high mountain ranges, our winter snow, the ice on lakes and the polar oceans, and the frozen ground in much of the Arctic landscape called permafrost.

The cryosphere is shrinking. Snow cover is reducing, glaciers and ice sheets are melting and permafrost is thawing. We’ve known this for most of my 25-year career, but the report highlights that melting is accelerating, with potentially disastrous consequences for humanity and marine and high mountain ecosystems.

At the moment, we’re on track to lose more than half of all the permafrost by the end of the century. Thousands of roads and buildings sit on this frozen soil – and their foundations are slowly transitioning to mud. Permafrost also stores almost twice the amount of carbon as is present in the atmosphere. While increased plant growth may be able to offset some of the release of carbon from newly thawed soils, much will be released to the atmosphere, significantly accelerating the pace of global heating.

Sea ice is declining rapidly, and an ice-free Arctic ocean will become a regular summer occurrence as things stand. Indigenous peoples who live in the Arctic are already having to change how they hunt and travel, and some coastal communities are already planning for relocation. Populations of seals, walruses, polar bears, whales and other mammals and sea birds who depend on the ice may crash if sea ice is regularly absent. And as water in its bright-white solid form is much more effective at reflecting heat from the sun, its rapid loss is also accelerating global heating.

Glaciers are also melting. If emissions continue on their current trajectory, smaller glaciers will shrink by more than 80 per cent by the end of the century. This retreat will place increasing strain on the hundreds of millions of people globally who rely on glaciers for water, agriculture, and power. Dangerous landslides, avalanches, rockfalls and floods will become increasingly normal in mountain areas.


Rising oceans, rising problems

All this melting ice means that sea levels are rising. While seas rose globally by around 15cm during the 20th century, they’re now rising more than twice as fast –- and this rate is accelerating.

Thanks to research from myself and others, we now better understand how Antarctica and Greenland’s ice sheets interact with the oceans. As a result, the latest report has upgraded its long-term estimates for how much sea level is expected to rise. Uncertainties still remain, but we’re headed for a rise of between 60 and 110cm by 2100.

Of course, sea level isn’t static. Intense rainfall and cyclones – themselves exacerbated by climate breakdown – can cause water to surge metres above the normal level. The IPCC’s report is very clear: these extreme storm surges we used to expect once per century will now be expected every year by mid-century. In addition to rapidly curbing emissions, we must invest millions to protect at-risk coastal and low-lying areas from flooding and loss of life.

Ocean ecosystems

Up to now, the ocean has taken up more than 90 per cent of the excess heat in the global climate system. Warming to date has already reduced the mixing between water layers and, as a consequence, has reduced the supply of oxygen and nutrients for marine life. By 2100 the ocean will take up five to seven times more heat than it has done in the past 50 years if we don’t change our emissions trajectory. Marine heatwaves are also projected to be more intense, last longer and occur 50 times more often. To top it off, the ocean is becoming more acidic as it continues to absorb a proportion of the carbon dioxide we emit.

Collectively, these pressures place marine life across the globe under unprecedented threat. Some species may move to new waters, but others less able to adapt will decline or even die out. This could cause major problems for communities that depend on local seafood. As it stands, coral reefs – beautiful ecosystems that support thousands of species – will be nearly totally wiped out by the end of the century.

Between the lines

While the document makes some striking statements, it is actually relatively conservative with its conclusions – perhaps because it had to be approved by the 195 nations that ratify the IPCC’s reports. Right now, I would expect that sea level rise and ice melt will occur faster than the report predicts. Ten years ago, I might have said the opposite. But the latest science is painting an increasingly grave picture for the future of our oceans and cryosphere – particularly if we carry on with “business as usual”.

The difference between 1.5°C and 2°C of heating is especially important for the icy poles, which warm much faster than the global average. At 1.5°C of warming, the probability of an ice-free September in the Arctic ocean is one in 100. But at 2°C, we’d expect to see this happening about one-third of the time. Rising sea levels, ocean warming and acidification, melting glaciers, and permafrost also will also happen faster – and with it, the risks to humanity and the living planet increase. It’s up to us and the leaders we choose to stem the rising tide of climate and ecological breakdown.

Mark Brandon, Professor of Polar Oceanography, The Open University.

This article is republished from The Conversation under a Creative Commons license. Read the original article.