On 23 December the ONS published data on labour productivity in the UK for the 3rd quarter 2011. The release and supporting datasets also contain information on labour productivity across the UK regions compared to the UK between 2003 and 2010. As with earlier posts what is interesting from these data is the change pre recession and post recession. The charts show labour productivity in Scotland, measured by nominal GVA per filled job and nominal GVA per worked hour. Clearly, the number of hours worked can vary independently of the numbers employed, so both are useful statistics, with GVA per hour tending to be preferred by economists.
The first chart shows the track of Scottish labour productivity relative to the UK = 100 between 2003 and 2010.
The chart shows that in the years to 2007 labour productivity in Scotland remained broadly in the range 94% to 96% of the UK figure. However, after the recession, by 2010, labour productivity in Scotland had risen to parity with the UK on GVA per job and to just below the UK - 99.3% - on GVA per hour.
What explains the change?
The most obvious explanation is that the loss of jobs during the recession was relatively greater in Scotland than in the UK as a whole, while output held up better in Scotland. See this post and the November Fraser of Allander Institute Economic Commentary.
But, the lesser recourse to labour hoarding may not be the whole explanation.
The following charts show labour productivity relative to the UK across the UK regions before recession in 2007 and, roughly, at the recession trough in 2010.
From these charts it is clear that Scotland's relative position improved from 4th to 3rd in the regional rankings on both productivity measures. Specifically, Scotland overtook the East of England. An examination of the recent regional GVA statistics suggests this relative improvement to the UK and the East of England may have been due to manufacturing output - which tends to have higher labour productivity - holding up better in Scotland during the recession. In addition the financial services sector, another high productivity sector, held up better in Scotland than in East of England during the recession.
So, the tentative conclusion is that the improvement in Scottish labour productivity is due to a greater jobs shakeout and sector composition effects. These data cannot tell us whether the Scottish economy has become intrinsically more competitive than the rest of the UK. For that, we need data on labour costs and crucially information on changes in capital productivity. Unfortunately, data on multi-factor productivity is not readily available for Scotland, or the other UK regions.