I believe it is a mix of factors rather than a single one. Education and infrastructure differences are important elements and these interact with agglomeration effects (sorting). It takes a well educated workforce for companies to invest in high productivity activities, a well educated workforce is the outcome of education, employment opprtunities, and agglomeration, and without the right infrastructure, the returns on such investments may not be high. But, at the end of the day, without investing in education, I think that addressing other margins will have little effectiveness in addressing the disparity of productivity and living standards.

Wage increases - for example through high(er) minimum wages - may spur sustained productivitiy growth but only to the extent that they spur investment in skills and in technology which, in most cases, go hand in hand. Investment in skills requires government investment in education of the population from an early age throughout to apprentices, university graduates, and further adult education. This requires aboloshing the UKs dual education market which caters for those who can invest in private education mainly. It requires providing families with child care to prevent skill loss during times out of the labor market and social safety nets for those whose investments do not pay off. It requires a flexible labor market. These are all policies seen in Scandinavia which also rely on low levels of government debt, efficient pension systems, and this takes time. Just increasing real wages by themselves may not do much apart from exporting jobs and motivating firms to invest in labor saving technologies. A high wage economy without investment in skills will force individuals with lower skills out of the workforce. There might be shorter run motivating factors of higher wages but they cannot sustain longer run productivity enhancements, Britain's main problem.