Productivity and pay by region and sector in the UK

I’m sharing this #dataisbeautiful #charticle because I found it really interesting. No more profound reason than that!

I had previously thought that, broadly speaking, employees’ pay was pretty closely correlated with their productivity (output per hour worked). The logic for this would be that employers can afford to pay more productive workers more. Indeed, it is my understanding that such a correlation does exist at the level of individual people and businesses. And, as per the left hand panel of the chart above, it also exists at the regional level in the UK.

However, looking at things through a sectoral lens throws up some interesting patterns. I was alerted to this when, after triple checking, I still found that productivity in the professional, scientific and technical services sector (pink square in the right hand panel above) was nowhere near as high as I had expected. I had simply assumed that, because pay in that sector was relatively high, productivity would be, too. Of course, the analysis would make sense to do at the sub-sectoral level, but because I wanted to also look at regional patterns, I stuck with this higher level of aggregation.

I’m pretty sure some of you out there will be thinking something along the lines of, “well, that’s obvious, isn’t it, because [XYZ]”. Please do send me your XYZs! I only put the data together (after some wrangling, as usual) 15 minutes ago, and it’s midnight. So I’m not going to analyse it very deeply right at the moment. However, wages no doubt reflect — as ever — supply and demand. On the supply side, people in professional, scientific and technical services tend to have a relatively high level of education and one that is not very sector-specfic. That gives them options to work in quite a range of different roles and therefore some bargaining power when it comes to pay.

On the demand side, the some of the sectors above the linear regression line in the right hand side of the chart are ones which have experienced relatively speaking faster growth in output and (without a corresponding growth in productivity) in labour demand. This is particularly the case for information and communication, and professional, scientific and technical services. However, the picture is never that clear cut: output and labour demand have also gone up in some sectors below the regression line, such as admin and support services, hospitality, and arts and entertainment.

Look forward to hearing your thoughts!