Productivity is one of those words that is used frequently but understood in very different ways. Since becoming lead for the Wales Productivity Forum, one of the clearest lessons for me has been just how varied people’s interpretations of productivity can be. For some, it is closely associated with profit or efficiency.
For others, it feels like an abstract economic concept, distant from the realities of everyday working life. In practice, productivity is much simpler, and much more important, than it is often made to sound.
At its most fundamental level, productivity is about generating more value from the resources we already have. Those resources include labour, capital, physical infrastructure and technology. Value, importantly, is not limited to monetary measures alone. In a business context, productivity might be reflected in producing more output or producing output that is of higher value. In the public sector, the same principle applies, but value may be measured in terms of social outcomes, service quality or wider impact rather than financial returns.
This distinction matters because productivity does not mean working longer hours or simply adding more inputs. Nor does it require people to work harder in a narrow sense. Improvements in productivity can come from changes in how work is organised, the adoption of different technologies, better management practices, or a shift towards outputs that deliver greater value. Confusing productivity with efficiency or cost-cutting risks missing this broader picture, particularly in areas such as public services where value is harder to measure but no less real.
Despite its importance, productivity is often treated as a dry economic concept rather than something that affects people’s daily lives. In reality, it is central to future living standards in Wales. Productivity is the main driver of wages, and therefore of economic wellbeing. It shapes whether businesses are competitive, whether they are able to grow and invest, and whether they can offer secure and rewarding employment. In the public sector, productivity determines how effectively constrained budgets are translated into outcomes that matter, such as the capacity of the health system or the education system. Using resources more productively is directly linked to issues people care about, including waiting times, service quality and long-term resilience.
Taken together, higher productivity supports stronger tax revenues and allows those resources to be spent more effectively in pursuit of social and environmental goals. When framed in this way, productivity is not remote from everyday concerns. It underpins many of the outcomes that shape quality of life across Wales.
So why, given its significance, does productivity struggle to command sustained attention? Part of the answer lies in its complexity. Productivity is influenced by many factors, and its benefits tend to emerge over the long term rather than immediately. In contrast, issues such as inflation, the cost of living or pressures on public services are more tangible and urgent, making them easier for policymakers and the public to engage with. Productivity improvements require long-term investment and coordination, and they do not deliver quick wins. Action taken today will not transform productivity tomorrow, particularly in a nation like Wales that faces deep-rooted structural challenges.
Wales shares many of the same productivity challenges as the rest of the UK following the financial crisis, including a slowdown in productivity growth. However, Wales started from a lower base, meaning the problem is both persistent and more acute. Productivity levels remain significantly below the UK average, and within Wales there are pronounced regional disparities. Some areas perform relatively better than others, but several parts of Wales rank among the least productive in the UK as a whole, with an evident east-west divide that reflects geography and connectivity.
There is no single explanation for this, and no simple solution. Productivity is the outcome of a wide range of interacting factors. At the level of the individual, it reflects human capital, including education and health. At the organisational level, it is shaped by investment, technology, innovation and management practices. Beyond that, organisations operate within a wider context that includes policy frameworks, transport, digital infrastructure and geography. Wales faces weaknesses across many of these dimensions. There are challenges linked to skills and health, lower levels of business investment and innovation, and constraints associated with a peripheral location and uneven infrastructure.
Because these factors reinforce one another, addressing them requires coordinated action rather than isolated interventions. This is why the Wales Productivity Forum has argued for greater alignment between policymakers, businesses and public sector leaders, with a shared focus on long-term improvement. Investment in human capital, infrastructure and organisational capability will not yield immediate results, but over time it is essential if Wales is to close its productivity gap.
What has been missing in Wales is a clear sense of overall direction and long-term commitment to productivity improvement. Short-term priorities will always demand attention, but productivity requires sustained focus beyond electoral cycles. A more independent, expert-led approach to monitoring and advising on productivity could help signal that this is a national priority, supported by realistic ambitions and consistent policy attention.
Addressing Wales’s productivity gap would have far-reaching implications for economic and social wellbeing. It is not an easy challenge, and it will not be resolved quickly. But productivity is worth the investment, precisely because of the profound impact it has on people’s lives, businesses and public services across Wales.
Professor Melanie Jones talks about this and more in the Unlocking Wales' Productivity Potential podcast episode Understanding Productivity in Wales. Listen to the podcast here.
