A perceived trade-off between job creation and productivity is misleading and risks distorting economic policy in Wales.
Business and policy leaders taking part in a roundtable hosted by Business News Wales and the Wales Productivity Forum challenged the idea that improving productivity must come at the expense of employment, warning that this assumption can lead to short-term decision-making.
The discussion highlighted a long-standing tension in economic policy, where increasing employment levels is often prioritised over improving the value generated by those jobs.
Phil Jones, chief executive of Business in Focus, said this reflects a broader political choice, with governments balancing the goal of maximising economic participation against the longer-term ambition of raising productivity.
He said that in practice, this can result in a focus on maintaining or increasing employment, particularly in sectors with lower productivity, rather than pursuing more fundamental economic change.
However, there was broad agreement that this is not an inevitable trade-off. Participants pointed to evidence that economies can achieve both high employment and high productivity, particularly where investment supports business growth, innovation and workforce development.
Professor Melanie Jones, lead of the Wales Productivity Forum at Cardiff Business School, said productivity growth can enable firms to expand, enter new markets and create additional roles, rather than reduce headcount.
She emphasised that higher productivity can lead to increased competitiveness, supporting both job creation and higher wages over time.
The discussion also highlighted the importance of job quality, with participants noting that focusing solely on the number of jobs created can obscure wider economic performance.
Chris Meadows, director at CSconnected, said greater emphasis should be placed on higher-value roles and sectors, where productivity gains can have a wider impact across the economy, including through supply chains.
At the same time, there was recognition that improving productivity can lead to changes in the labour market, including shifts in the types of roles available. Advances in technology, including artificial intelligence, were cited as likely to increase efficiency, while also requiring workforce adaptation.
Participants said this underlines the importance of ensuring that workers are supported to move into new opportunities, rather than viewing productivity improvements as inherently leading to job losses.
There was also discussion of the need to balance national economic objectives with social outcomes. Ensuring that people are able to access employment remains a key priority, particularly in areas with higher levels of deprivation.
However, participants said this should not come at the expense of longer-term productivity growth, with a more balanced approach needed to support both inclusion and economic performance.
Robert Lloyd Griffiths, chair of the Wales Productivity Forum and director for Wales at ICAEW, said productivity and economic performance are closely linked, with improvements in productivity underpinning higher wages, stronger public finances and wider societal benefits.
Participants said reframing the relationship between jobs and productivity will be important in shaping future policy, with a need to move away from viewing the two as competing objectives.
