Labour productivity during the Great Depression and the Great Recession in UK engineering and metal manufacture

Abstract

This article compares UK labour productivity during the Great Depression (GD) and the Great Recession (GR) in engineering, metal working, and allied industries. Over the downturn of the GD cycle, hourly labour productivity was countercyclical. Over the GR downturn, hourly productivity was procyclical. The combined flexibility of workers and hours, together with short-run diminishing returns, is argued to be the main drivers behind the GD productivity outcomes. There was less workers and hours responsiveness in the GR downturn. These differences are linked to educational and human capital arguments. Employers’ real-wage costs feature importantly in both depressions. In the GD, real hourly product wages rose steeply serving to encourage shorter work weeks, which produced positive impacts on average hourly labour productivity. Unusually, high-labour supply pressures in the GR acted to reduce real hourly product wages serving to protect the jobs of less efficient workers and to lower average hourly labour productivity.