The productivity gap between the UK and its G7 competitors remains persistent, with output per hour worked around 12% lower than the G7 average. A key factor behind this stagnant performance has been underinvestment in public infrastructure and transport networks. While transport links within major conurbations like London remain robust, connectivity in regional hubs in the North of England is severely lagging, hindering labour mobility and business efficiency.
One potential solution is targeted public sector investment in regional rail and broadband networks, which would lower logistics costs and widen the pool of skilled workers available to northern enterprises. Facilitating greater capital investment through tax incentives could also encourage firms to adopt advanced digital technologies.
Germany, unlike the UK, has maintained high levels of public infrastructure investment, helping to sustain its superior labour productivity over the last decade. Addressing these infrastructural and skills deficits is vital if the UK is to boost long-term productive capacity and achieve sustainable real wage growth.
Extract G states: 'Germany, unlike the UK, has maintained high levels of public infrastructure investment, helping to sustain its superior labour productivity over the last decade.'
Explain two policies that the government could adopt to try to increase labour productivity in the UK.
245 exam-style questions on AQA A Level Economics 2.5 Fiscal policy and supply-side policies, covering 2.5.1 Fiscal policy and 2.5.2 Supply-side policies. Each one has a worked solution and a mark scheme showing where the marks go.