Boosting pay and productivity for baristas and bar staff may provide answer to UK’s productivity puzzle

Today the ONS released the latest set of productivity figures for the UK, JRF discuss what they mean for the retail and hospitality sectors.

New figures from the ONS, UK productivity: Oct to Dec 2017, published today showed:

  • Productivity growth in retail has stalled. Retail productivity has grown over the last ten years, bucking the national trend, but has fallen 1.6% over the last year. Productivity in the retail sector remains less than four fifths of national productivity.
  • Hospitality has seen really dire productivity growth over the last ten years, seeing productivity fall 6%. Fortunes have not changed over the last year, with productivity flat. Hospitality productivity is only just over half of national productivity.

Productivity by pound per hour worked - retail and hospitality sectors compared to whole UK economy

Responding to the figures, Dave Innes, economist at the independent Joseph Rowntree Foundation (JRF), said:

“This is bad news for millions of low-paid workers, who are seeing real wages stuck in the doldrums and increasingly trapped in poverty. Despite record employment in the economy, one in eight workers are locked in poverty. Retail and hospitality alone account for a third of workers in poverty. The IFS has confirmed one of the biggest driving factors behind the real wage slump for the lowest earners is our dismal productivity performance.

“Low wage sectors matter if we want to make the economy work for everyone and improve national productivity. Raising productivity in low-wage sectors to the levels in Germany, France and the Netherlands would close between a fifth and a quarter of our productivity gap with them. If we want to solve the productivity puzzle as well as flat living standards, better management of our baristas and bar staff may be part of the answer.”

The findings come as JRF launches a new briefing, setting out how low-wage sectors are crucial to helping improve the country’s national productivity performance and support the lowest paid workers. The links between low productivity, low pay and in-work poverty, published today finds:

  • Low-wage sectors are a problem for our economy. German, French and Dutch workers in these sectors produce more in four days than British workers do in five. The high incidence of low pay in these sectors means that retail and hospitality alone account for a third of workers in poverty.
  • The UK’s productivity gap with its competitors in low-wage sectors is not due to a lack of capital investment or workers’ formal skills but how well we use workers in these sectors.
  • To raise productivity and drive up pay, productivity strategies for low-wage sectors such as retail and hospitality should focus on: increasing the proportion of workers in training; improving management practices; increasing the percentage of workers using ICT; and reducing the share of temporary workers.