Public Services In A Digital Future

30th October 2022

This blog is part of a collaborative Joseph Rowntree Foundation project examining and exploring ideas we need to advance Social Justice in a Digital Age.

"Productivity isn't everything" wrote Paul Krugman, Nobel prize-winning economist in 1990. "But in the long run", he went on, "it's almost everything." Getting more output for each unit of input sounds great. That's why lifting productivity growth has been a central ambition of every government in the post-war era. More productive economies enable higher living standards, not only in those sectors or firms delivering it, but for everyone.

Some sectors are harder to make more productive than others. To attract and retain workers in these less productive sectors from leaving to join more productive ones, something close to the real wage growth seen in the broader economy needs to be offered to them. In other words, workers in less productive sectors will enjoy real wage gains despite productivity growth being so hard to achieve in their sectors versus others. This was Baumol’s central insight. In this way Baumol might be regarded as the godfather of trickle-down - or at least trickle-across - economics. But, as James Plunkett explains, Baumol either missed or underplayed the ability of institutions and of government to get in the way of his ‘iron law’ holding true.

In the United Kingdom, high-touch human sectors for which productivity gains have been most elusive - social care, childcare, healthcare, education – are concentrated in areas dominated by public provision. This is the result of a political choice: as a society we have decided that there should be some universal floor for human dignity. And while more resource-intense versions of these public services are available through private channels, the universal floor is one that could not be afforded by all if not provided through the public sector.

To read the full article go HERE