What Is The Productivity Gap?

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Over the years a significant productivity gap has developed between the United Kingdom and its main competitors which include the United States, Germany and France (O’Mahony and de Boer, 2002). In 2012, the widest productivity gap was to be reported in over 20 years, second to 1992 when the gap was as wide as 25%. The Office of National Statistics reported that in comparison to the United States, Germany, France, Italy, Japan and Canada the UK is seen to be behind by an average of 21% on an output per hour basis for an individual employee. (ONS, 2014) Throughout this report we will investigate what the productivity gap is, a timeline of the gap and the reasons why this is occurring and what both the government and businesses can do in order to rectify the problem and increase productivity nationally.
What is the productivity gap?
The productivity gap is defined by the Economist as:
“…an indicator of a country’s output capabilities is the ratio between the productivity of a benchmark country (such as the United States) and that of a less developed economy.” (Economist, 2013)
Therefore, it is compared by the average output produced per hour for an individual employee and then compared against the other competitor countries. Productivity is measured by comparing the Gross
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(The Independent, 2012) The government have been heavily investing in small and medium sized businesses (SME’s) by offering grants to banks to continue their funding. However, is this really sufficient? In an economy falling behind its major companies can SME’s really be the answer to all of the United Kingdom’s problems? The government is borrowing £1billion every two and half days but is only investing this amount in SME’s of their funding for the year 2012. If there really is a gap in the funding of these companies should there not be more government investment than

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