Public sector productivity – a tricky concept
Much is being made by the usual anti-public sector suspects of last week’s ONS stats. Here is David Smith in today’s Sunday Times for example:
The other noteworthy development was the publication by the Office for National Statistics of new productivity estimates for the public sector. These showed that, despite a small improvement lately, productivity has fallen most years in the past decade. Calculating output is not easy, but the ONS thinks the average public-sector worker’s output in 2007 was 3.2% lower than in 1998.
Contrast that with the private or “market” sector. Over the same period, again according to the ONS, market-sector productivity rose 22.8%. The difference between the two sectors is striking.
Of course supporters of public services must never fall into the trap of defending inefficiency or opposing changes that genuinely improve public services.
But I have always had a big problem with attempts to measure public sector efficiency. Efficiency is simply a measure of outputs against inputs. I may not be an economist, but I did study engineering, and I can do ratios.
The problem is that the public sector does not lend itself to such crude measures. If you double class sizes and exam results only decline by a third, then that class has become more efficient. Yet the education system is worse as a result.
One could make the point even more cheaply by considering a hospital that halves the numbers of doctors but whose death rate does less than double.
Those of us who argue for a public realm say that some activities simply do not lend themselves to private sector/market solutions, just as most of us accept the converse – that some activities should not be done by the state.
Perhaps one clue for where the boundary should lie comes from asking whether for any activities simple productivity measures make any sense.
And one conclusion might be that managing the public sector is much harder than managing the private sector. Might it be Britain’s failing private sector that needs an injection of good public sector managers – not the other way round?