--- canonical_url: "https://csls.ca/ipm-archive/ipm-issue-42/the-link-between-the-standard-of-living-and-labour-productivity-in-the-uk-a-decomposition/" title: "The Link Between the Standard of Living and Labour Productivity in the UK: A Decomposition" author: name: "CSLS" url: "https://csls.ca/author/cslc/" date_published: "2026-07-13T08:02:05+00:00" date_modified: "2026-07-13T08:02:05+00:00" post_type: "ipm" summary: "" ipm_issue_period: - "Spring 2022" ipm_keyword: - "1977-2019" - "decomposition" - "inequality" - "labour share" - "LSE" - "median household income" - "NIESR" - "Oulton" - "productivity" - "standard of living" - "UK" ipm_research_theme: - "Labour" - "Well-being and living standards" ipm_country_focus: - "United Kingdom" featured_image: "https://csls.ca/wp-content/uploads/2026/06/IPM_50_banner.webp" status: "publish" --- # The Link Between the Standard of Living and Labour Productivity in the UK: A Decomposition Canonical URL: https://csls.ca/ipm-archive/ipm-issue-42/the-link-between-the-standard-of-living-and-labour-productivity-in-the-uk-a-decomposition/ # The Link Between the Standard of Living and Labour Productivity in the UK: A Decomposition [Download full PDF article](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-42-9-Oulton.pdf) Cite this article × Cite this article as: Oulton, Nicholas. 2022. “The Link Between the Standard of Living and Labour Productivity in the UK: A Decomposition.” International Productivity Monitor, No. 42 (Spring 2022): 187–211. https://www.csls.ca/ipm-archive/ipm-issue-42/the-link-between-the-standard-of-living-and-labour-productivity-in-the-uk-a-decomposition/ ## Author: - Nicholas Oulton London School of Economics; National Institute of Economic and Social Research (NIESR) ## IPM Issue 42 Spring 2022 pp. 187–211 ## Related IPM articles [The Relationship between Efficiencies Defenses for Mergers and TFP Growth Robin Shaban Fall 2025 | IPM Issue 49 | pp. 82–102](https://csls.ca/ipm-archive/ipm-issue-49/the-relationship-between-efficiencies-defenses-for-mergers-and-tfp-growth/) [Adult Skills and Productivity: New Evidence from PIAAC 2023 Dan Andrews, Balázs Égert, Christine de La Maisonneuve Fall 2025 | IPM Issue 49 | pp. 41–63](https://csls.ca/ipm-archive/ipm-issue-49/adult-skills-and-productivity-new-evidence-from-piaac-2023/) [The Potential Impact of Pro-competitive Regulatory Reforms on Productivity and Growth in Canada Gilbert Cette, Jimmy Lopez, Giuseppe Nicoletti, Océane Vernerey Fall 2025 | IPM Issue 49 | pp. 3–40](https://csls.ca/ipm-archive/ipm-issue-49/the-potential-impact-of-pro-competitive-regulatory-reforms-on-productivity-and-growth-in-canada/) [ONS Response to ‘Are UK Regional Productivity Disparities Really Narrowing?’ Richard Prothero Spring 2025 | IPM Issue 48 | pp. 85–89](https://csls.ca/ipm-archive/ipm-issue-48/ons-response-to-are-uk-regional-productivity-disparities-really-narrowing/) [New Measures of Public Service Productivity: Lessons and Results from the United Kingdom Richard Heys Spring 2025 | IPM Issue 48 | pp. 90–114](https://csls.ca/ipm-archive/ipm-issue-48/new-measures-of-public-service-productivity-lessons-and-results-from-the-united-kingdom/) [De-industrialization and the Great Productivity Slowdown: What Comes Next? Paul Fisher Spring 2025 | IPM Issue 48 | pp. 115–138](https://csls.ca/ipm-archive/ipm-issue-48/de-industrialization-and-the-great-productivity-slowdown-what-comes-next/) [Online Supplementary Material: UK Regional Productivity Data Fokke Reitze Gouma, Philip McCann, Raquel Ortega-Argilés Spring 2025 | IPM Issue 48 | pp. 15–19](https://csls.ca/ipm-archive/ipm-issue-48/online-supplementary-material-uk-regional-productivity-data/) [Are UK Regional Productivity Disparities Really Narrowing? An Investigation into Recent Productivity Data Revisions Fokke Reitze Gouma, Philip McCann, Raquel Ortega-Argilés Spring 2025 | IPM Issue 48 | pp. 63–84](https://csls.ca/ipm-archive/ipm-issue-48/are-uk-regional-productivity-disparities-really-narrowing-an-investigation-into-recent-productivity-data-revisions/) [Appendix: UK Productivity Growth Rates Across Data Vintages and Studies Josh Martin Spring 2025 | IPM Issue 48 | pp. 65–73](https://csls.ca/ipm-archive/ipm-issue-48/appendix-uk-productivity-growth-rates-across-data-vintages-and-studies/) [The UK Productivity Slowdown: A Review of Timing, Magnitude, and Drivers Josh Martin Spring 2025 | IPM Issue 48 | pp. 1–34](https://csls.ca/ipm-archive/ipm-issue-48/the-uk-productivity-slowdown-a-review-of-timing-magnitude-and-drivers/) ## Abstract ## Résumé EN FR Copy link Email LinkedIn According to Paul Krugman, “Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.” But productivity and the standard of living are different concepts and are measured in different ways, so the question is, what is the linkage between them? Productivity is typically measured by GDP per hour. The standard of living has potentially many aspects such as health, longevity, personal security, and relationships. But here I take a narrower view and stick to the national accounts. So the standard of living is measured by the household disposable income of the median individual. I use the median rather than the mean so that inequality is taken into account. I develop a decomposition of the growth of median household income which relates it to the growth of productivity via eight additional factors, one of which is inequality; four other factors are measures of labour market performance. I apply this decomposition to the UK over the period 1977 to 2019. I find that productivity growth was by far the most important factor in accounting for the growth of living standards which was substantial up to 2007; rising inequality prior to 2007 retarded the growth of living standards but not by much. Since 2007 productivity growth has collapsed as has also the growth of living standards. The fall in the latter has been mitigated somewhat by a fall in inequality. Selon Paul Krugman, « La productivité n’est pas tout, mais à long terme, c’est presque tout. La capacité d’un pays à améliorer son niveau de vie au fil du temps dépend presque entièrement de sa capacité à augmenter sa production par travailleur. » Mais la productivité et le niveau de vie sont des concepts différents mesurés de différentes façons. La productivité est typiquement mesurée par le PIB par heure. Le niveau de vie est ici mesuré par le revenu disponible du ménage de l’individu médian. À l’aide de données du Royaume-Uni, l’article décompose le lien entre ces deux mesures, quantifiant les contributions de la part du travail, des termes de l’échange du travail, de la distribution des revenus et d’autres facteurs. [Download full PDF](https://csls.ca/wp-content/uploads/2026/07/IPM-Issue-42-9-Oulton.pdf)