Work, leisure ... and productivity

 Productivity is completely fundamental to the performance of the whole economy. That's why the UK's current poor performance - the productivity gap - is such a concern. Normally, productivity rises as the economy moves out of recession, but the reverse has happened in the UK, creating a much-discussed productivity puzzle.

 I'm going to switch focus slightly, and explore some links between productivity, leisure and the workplace.

Of course, the productivity figures might just be wrong. I'm interested in the idea that the growth of the digital economy is not being captured by statisticians. It's only a hunch, but the economy (and productivity) might be growing much faster than we think.

Over the course of decades, UK productivity has increased enormously, but happiness is still proving elusive. Are we missing something? For a while I've been wondering if less is more ... is there any evidence that we should be working less, but working smarter?

A recent Economist article adds to this discussion.

Keynes wrote in "Economic possibilities for our grandchildren" in 1930 that people might need work no more than 15 hours per week by 2030. There’s some movement in that direction: data from the OECD shows that the vast majority of people work fewer hours than they did in 1990. And it seems that more productive—and, consequently, better-paid—workers put in less time in at the office. The relationship between productivity (GDP per hour worked) and annual working hours is pretty clear. The Greeks are some of the most hardworking in the OECD, putting in over 2,000 hours a year on average. Germans, on the other hand, are comparative slackers, working about 1,400 hours each year. But German productivity is about 70% higher.

Perhaps people who work less produce more!

Economists are fascinated by this question. On the one hand, a higher wage raises the opportunity cost of leisure time and should lead people to work more. On the other hand, a higher income should lead a worker to consume more of the stuff he or she enjoys, which presumably includes leisure.

Some research shows that higher pay does not, on net, lead workers to do more. Rather, they may work less. A famous study which looked at New York taxi drivers, reached a controversial conclusion. The authors suggested that taxi drivers had a daily income "target", and that when wages are high, drivers will reach their target more quickly and quit early; on low-wage days they will drive longer hours to reach the target.

Alternatively, perhaps people who work fewer hours are more productive. Adam Smith reckoned that “[T]he man who works so moderately as to be able to work constantly, not only preserves his health the longest, but in the course of the year, executes the greatest quantity of works.”