Efforts to reverse the trend seem to be having little effect, and so Connect columnist Kevin Keen took a look at the most recent figures.
Having considered what they mean for Jersey, he uses his latest column for Express to issue some strong words of advice to the government…
“We have been hearing a lot about the need to make our economy more productive over the last few months – something important, but much easier said than done in an export-led economy like ours.
Before we get into the stats, a quick reminder: GVA is made up of profits from firms operating here plus total wages. Therefore, to make the economists and politicians happy, we need Jersey businesses to earn bigger profits so they can share them with their staff in higher wages.
In the weird world of the economists, though, the GVA of the public sector is just the total wage bill! It’s also important to remember in this context that productivity is not the same as efficiency. It is not just about working harder or smarter – we also depend on what is happening elsewhere.
Pictured: Jersey’s Gross Value Added (GVA) figures 2000-2017. (Statistics Jersey)
In 2000, GVA per person was almost £55,000, while in 2017 it was £41,000 – a reduction of 25%.
We still compare pretty well internationally, though. According to the IMF, the USA was £44,000 last year, the UK £29,000, and China £6,000. Our very profitable, efficient and productive finance industry is the engine of our success because it has developed competitive advantage over many years. That said, financial services now have quite a few competitors, a lot more regulation ,and our big banking sector has had to deal with very low interest rates, which has meant the sector’s GVA has fallen by 35% since 2000.
If government really wants to support increased economic productivity, here are some things it can do:
- Be pro-local businesses and buy from them whenever they can;
- Consider carefully the impacts of new regulations on economic productivity;
- Continue to support agencies that promote export industries like finance, digital, agriculture and tourism;
- Employ only as many people as it really needs;
- Make sure tax policy supports all of our industries (even retail!);
- And encourage islanders to keep working past normal retirement age.
Pictured: “Financial services now has quite a few competitors, a lot more regulation and our big banking sector has had to deal with very low interest rates,” Kevin muses.
GDP and GVA are obviously very important, but I don’t think we should obsess over single measures like GVA per full-time employee (FTE). It is backward-looking, and takes no account of the potential of sectors like digital or the benefits of not having all your eggs in one economic basket.
Robert F. Kennedy warned about the limitations of GDP over 50 years ago, and what he said is well worth repeating:
“It counts napalm and counts nuclear warheads and armoured cars for the police to fight the riots in our cities. It counts Whitman’s rifle and Speck’s knife, and the television programs which glorify violence in order to sell toys to our children. Yet the gross national product does not allow for the health of our children, the quality of their education or the joy of their play. It does not include the beauty of our poetry or the strength of our marriages… It measures neither our wit nor our courage, neither our wisdom nor our learning, neither our compassion nor our devotion to our country, it measures everything in short, except that which makes life worthwhile.”
Wise words.”
The views expressed in this piece are those of the author, and not of Bailiwick Express.