Tories vs the OBR

Fraser Nelson has chided the media for not giving enough attention to the OBR’s forecast that the private sector will create 1.5 million jobs in the next five years. If I were he, I wouldn’t crow about this.
My chart, taken from my day job, shows why.  It shows annual labour productivity growth - defined as GDP divided by employment - over five year periods, along with the growth implied by the OBR forecasts for GDP (pdf) and employment (pdf).
It’s clear from this that the OBR’s forecast for lots of job creation implies low productivity growth.
Stunningly low, in fact.
The OBR expects productivity on this measure to grow by just 1.8% a year over the next five years. This is less than it grew in the eight years to March 1979 (2.1% pa).
In other words, a massive switch in employment from the “inefficient” public sector to the “dynamic” private sector will be associated with lower productivity growth than we saw at a time when trades unions were, allegedly, holding the country to ransom.
If the OBR is correct - and of course it probably won't be - then Tories’ basic views about the economy are plain wrong. Shrinking the state and weakening trades unions do not increase productivity growth.
As I say, Fraser shouldn’t draw too much attention to the OBR forecast.
Now, you might object here that my measure of productivity is biased. My employment measure - actually, the OBR’s - conflates full- and part-time jobs. This means that if the share of part-time employment rises, productivity will fall on my measure.
This, though, is little help to Fraser - unless he wants to draw attention to the fact that many of the private sector jobs that‘ll be created will only be part-time ones.
(The OBR, AFAIK, does not give separate forecasts for full and part-time employment).

Comments

[Rob]

Is there something inherently wrong with part-time jobs these days, or is this just an old-fashioned attitude? Plenty of people combine working with studying (which should raise productivity in the long run), childcare, caring for relatives, running a household or simply pursuing their own objectives in life, whatever they may be. Yes, full-time work does lead to a person becoming very proficient at doing that job, and that's good for productivity, but I'm not sure that part-time work is *that* much worse.

[Tony]

chris,
is your definition of productivity gdp/hours worked? if not, what difference,if any, would that make?
t

[chris]

Good question Tony.
My definition is GDP per worker. I chose this because the OBR do not forecast hours worked.
However, looking at productivity measured by GDP per hour, the historic pattern in the chart remains - most notably, that productivity was slowing before the recession. For example, it grew by 1.9% pa in the five years to 2007Q4, compared to 2.4%pa in the previous five (to 2002Q4).

[BenP]

Shame we can't superimpose the OBR's previous predictions to reality.

[rjw]

heh. nicely skewered