Reversing austerity and raising the minimum wage are two ways to fix the producivity crisis, the report said.
A report has called on government to increase its spending and that of consumers in order to restore business confidence and improve worker productivity.
The New Economics Foundation (NEF) said that when businesses are not confident, they don’t commit to hiring people on a permanent basis – instead preferring short-term or zero-hour contracts and outsourcing.
Workers who are outsourced or on zero-hour contracts are not very productive. So to fix the UK’s low productivity crisis, the government should restore business confidence by stimulating the economy, the report said.
Government should stimulate the economy in two ways, the NEF said. Firstly, by increasing government spending itself. Secondly, by making changes so that workers have more money to spend and more free time to spend it.
The report said government should increase its spending on social security, reversing austerity and on creating a zero-carbon economy. These are areas where increasing government spending has a particularly large impact on demand in the economy.
The report also said that the minimum wage should be increased, as should the number of statutory holiday days. This would give people more money to spend and more free time to spend it, thus increasing demand in the economy.
The NEF said that productivity was important because high productivity enables higher wages within a sustainable economy.
In the UK, productivity has stagnated since about 2008 after decades of steady growth. Since their 2008 peak, real hourly earnings have also stagnated.
In May, a different report argued that the UK should follow the example of Portugal which boosted its economy by increasing spending, raising the minimum wage and increasing holidays.
As you’re here, we have something to ask you. What we do here to deliver real news is more important than ever. But there’s a problem: we need readers like you to chip in to help us survive. We deliver progressive, independent media, that challenges the right’s hateful rhetoric. Together we can find the stories that get lost.
We’re not bankrolled by billionaire donors, but rely on readers chipping in whatever they can afford to protect our independence. What we do isn’t free, and we run on a shoestring. Can you help by chipping in as little as £1 a week to help us survive? Whatever you can donate, we’re so grateful - and we will ensure your money goes as far as possible to deliver hard-hitting news.