It seems pretty clear that if more output can be produced for a fixed period of labour input, then productivity will have increased.
British productivity is currently 28% lower than in France, 29% lower than in Germany and 30% behind the US.
These are significant numbers. Although we tend to work longer hours than Germany and France, we produce less output per worker.
The introduction of the living wage in April 2016 may encourage employers to look hard at this issue and figure out if investment is required. This could be targeted to stimulate increased productivity in the longer term. In this way the impact of rising wage rates (to accommodate the introduction of the living wage), will be countered.
Ironically, the increase in rates may not impact disposable income for employees. If a combination of increased mechanisation, computerisation and improvements in working practice do increase productivity, then it will take less labour hours to produce standard units of output. As a result, and even with increases in wage rates, take home pay may not change.
The other danger is that unemployment may rise if employers can fully mechanise tasks previously undertaken by lower wage earners.
Productivity is an issue that has deep rooted causes in the UK. It may require government intervention to deal with wider ranging issues such as: literacy, training, funds for investment, transport systems (roads, rail networks etc).
However, the long term outlook for GB Plc will be bleak if productivity continues to slip or stagnate. We must learn how to raise our game and compete on a more level playing field, otherwise attempts to increase the disposable income of the lower paid by introducing the living wage will possibly fail.