"At the Conservative party conference in October 2021, UK prime minister Boris Johnson announced that the government was “embarking on a change of direction” which would see the UK transition towards a new “high wage, high skill, high productivity” economic model.1 After years of governments celebrating high employment rates, this focus on the very real problems in the UK labour market is welcome. The UK not only has lower average productivity rates than other large economies, it also has a far larger productivity gap between the best and worst performing firms.2 Wider gaps in productivity between firms lead to wider gaps in rewards across workers, so low productivity is a crucial ingredient of the UK's high levels of both wage and income inequality. The government is therefore right to focus on productivity issues, for social justice as well as for economic reasons. Boosting productivity and pay at the bottom end would also help to rebalance the UK growth model which – given widespread low wages and worker insecurity – is heavily reliant on credit-financed consumption, or in other words, on household debt."

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