Without improvements to productivity, economic growth will slow also. Stronger productivity is the key to higher living standards because wages will not rise in the long term without any underlying improvements in the production process. Ultimately, the recovery will not be secure and living standards will not rise sustainably without productivity growth.
Strong GDP and employment growth throughout 2013 has highlighted productivity’s continued weakness. At the onset of the recession in Q1 2008, productivity initially fell. However, it has not recovered and remains 4% below the pre-crisis peak on an output per hour basis. Productivity has now fallen back to where it was in Q4 2005. Without improvements, we will have lived through almost a decade of stagnant productivity.