Abstract
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.
Highlights
This paper examines the effects of the Great Depression (GD) and the Great Recession (GR) on labour productivity in UK engineering, metal working and allied industries
(iii) Summary of key GD/GR cyclical comparisons (a) Real output in both the GD and GR periods fell by about 24% in EMA industries. (b) Peak-to trough percentage falls in both employment and total hours were considerably greater in the GD compared to the GR. (c) The percentage peak-to-trough fall in H exceeded that of E by 6% during the GD
The percentage peak-to-trough falls in H differed little from E in the three GR sectors. (d) The length of the average workweek in the two eras was in the order of 10 to 13 hours longer in the GD cycle than in its GR equivalents. (e) Actual weekly hours during the peak-to-trough period contracted by an average of 3.7 hours in the GD compared to GR falls of 2.8 hours in the Transport Equipment sector and little systematic variation in Basic Metals/Metal Products and Machinery/Equipment sectors. (f) The Q/H measure of labour productivity rose by 5.8% in the first year of the GD cycle and remained above its starting level during the peak-to-trough years
Summary
Any opinions expressed in this paper are those of the author(s) and not those of IZA. Research published in this series may include views on policy, but IZA takes no institutional policy positions. The IZA Institute of Labor Economics is an independent economic research institute that conducts research in labor economics and offers evidence-based policy advice on labor market issues. Supported by the Deutsche Post Foundation, IZA runs the world’s largest network of economists, whose research aims to provide answers to the global labor market challenges of our time. IZA Discussion Papers often represent preliminary work and are circulated to encourage discussion. Citation of such a paper should account for its provisional character. A revised version may be available directly from the author
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