DP1036 | Human Capital and Productivity in Manufacturing during the Twentieth Century: Britain, Germany and the United States

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In this paper we relate trends in the accumulation of human capital in Britain, Germany and the United States to overall production strategy and productivity trends. In the United States a strategy of standardized mass production led to high levels of labour productivity and concentration on the development of managerial capabilities, but neglect of the skills of the shop-floor labour force, while in Britain and Germany concentration on craft production led to greater emphasis on shop-floor skills. After the Second World War, however, British firms made an unsuccessful move towards standardized mass production. Since shop-floor skills were neglected, British firms were left in a weak position to take advantage of the recent switch of technological leadership away from American mass production methods to German modern craft production or `flexible production' methods, intensive in the use of skilled shop-floor labour within a small batch industrial environment. British manufacturing also adopted an American style `mission oriented' approach to R&D in contrast to the German style `diffusion oriented' approach, which helped to reinforce the move away from craft production. Since the 1980s, Britain has returned to a more skilled labour intensive strategy but still has a large skills gap to make good.