Economic Theory

The anti-productivity coalition that is holding back Britain

“Productivity isn’t everything, but in the long run, it’s almost everything.” Paul Krugman’s truism came back to me last week when I was talking to a classroom of surprisingly well-informed sixth-formers. We were discussing ways in which productivity could be increased.

Without productivity increases, average living standards can’t rise over time. The economy degenerates into a squabble over who gets what from a pot which is fixed in the short run, and is in danger of shrinking in the medium to long term should redistribution be pushed to the extent that it deters enterprise.

People get this in the abstract. The sixth-formers, and most other people, recognise that we have a decent standard of life only because generations past have found ways of producing things which have used fewer people and less time. And all but the eco-fruitcakes recognise that we need to continue to do this if we expect to be better off ourselves and help rescue more of our fellow inhabitants of the planet from poverty.

The problem is that attempts to boost productivity are rarely painless, and in the short run can generate losses as well as gains. Enclosing land and ending small-scale peasant farming in late mediaeval Britain boosted productivity, but destroyed a way of living. Building canals in the late 18th century speeded transport and increased competition but cost lives and destroyed habitats.

Nowadays the losers fight back, and they are armed with all manner of plausible arguments. Self-interest can usually be dressed up as something nobler. A third Heathrow runway would facilitate more flights – but this would mean more nasty carbon emissions. Enabling housebuilding on greenfield sites would relieve overcrowding and homelessness while helping to boost geographical mobility and reduce labour shortages. But what about the natterjack toad?

Sometimes the self-interest is hard to disguise. At the weekend I was up near Liverpool. Merseyrail has been taking delivery of more than 50 super-duper new trains which, together with other works to improve the network, are costing something not far south of half a billion pounds. However, many trains have been standing in sidings for a considerable time: their introduction has been delayed in large part because of union intransigence.

The cause has been a long-running dispute about driver-only operation, something which has also figured as a cause of strikes in other parts of the rail network, notably on the Northern Rail franchise.

Modern short-haul stopping trains can be operated by the driver alone. Using onboard cameras and/or platform mirrors, drivers can safely open and close doors at stations without the need for a guard, whose role in modern commuter trains resembles that of a lift attendant (now virtually extinct in developed countries).

You may have noticed that driver-only operation is already standard on London Underground, London Overground, c2c, Chiltern Railways and many other operators in Britain and other countries. The introduction of new trains on Merseyrail was an obvious time to remove guards and substantially boost labour productivity.

The unions, however, are bitterly opposed to further extension of one-person operation. They justify this position by concern for passenger safety. But reports by both the Rail Safety and Standards Board and the Office of Rail and Road have concluded that one-person operation is just as safe as two-person operation; indeed there may be some possibility that the former is safer as there is no possibility of confusion between the crew.

Moreover, in the case of Merseyrail the new trains are far safer than was previously the case. They all have ‘intelligent sliding steps’ and ‘gap fillers’ which, together with the levelling of around 100 platforms as part of the investment programme, make it virtually impossible to fall on the track while boarding, while wheelchair users need no assistance to board or leave the new trains.

The dispute began in 2016, well before any new trains arrived. In 2018 agreement was reached with RMT (which organises the guards), although the precise method of working was not agreed until last year. Meanwhile ASLEF (which organises the drivers) was still in dispute and did not settle until earlier this year.

What has the outcome been? It’s smothered in flim-flam, but at bottom the unions have won. There will be two employees on every train for the indefinite future.

The two unions involved have now generously agreed that the driver can open and close the doors, previously the responsibility of the guard. However, the renamed ‘Train Manager’ has first to signal to the driver, using a specially retrofitted keyboard, that it is safe to do so. Time is added on at each stop, presumably.

According to Today’s Railways, in the approved job description ‘the core responsibilities for the Train Manager are listed as customer service, train dispatch, revenue protection, light cleaning, to provide medical assistance, and provision of local information’. Few of these functions have any measurable outcomes, and add little to productivity.

To staff every train with two people is an expensive business. Drivers cost more, but even Train Managers are paid a basic £31k and with add-ons such as overtime, a final salary pension scheme, free travel and other benefits they don’t come cheap. They are also a constraint on operations. If the Train Manager fails to turn up, the train won’t run and passengers will experience delays and possible overcrowding.

It’s no doubt felt as a benefit to the erstwhile guards that they have kept their rebadged jobs, but in the long run passengers pay more and, as Merseyrail continues to be subsidised, so does the taxpayer. They have less to spend on other things, which would probably more valuable to them than the services of redundant and outdated rail employees. And these employees are kept in low-productivity jobs – worse, new employees will replace them as they retire or leave the industry – when they could potentially be redeployed to more useful occupations.

Editorial and Research Fellow

Len Shackleton is an Editorial and Research Fellow at the IEA and Professor of Economics at the University of Buckingham. He was previously Dean of the Royal Docks Business School at the University of East London and prior to that was Dean of the Westminster Business School. He has also taught at Queen Mary, University of London and worked as an economist in the Civil Service. His research interests are primarily in the economics of labour markets. He has worked with many think tanks, most closely with the Institute of Economic Affairs, where he is an Economics Fellow. He edits the journal Economic Affairs, which is co-published by the IEA and the University of Buckingham.

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