Sir Samuel Brittan says: "Falling real wages have priced workers into jobs, or least enabled them to stay in employment." And Paul Gregg says: "In the current environment it is easier, cheaper and less risky to hire to meet demand rather than invest."
The truth of this theory rests upon the nature of production functions. In Cobb-Douglas functions, labour and capital are easily substitutable and so if labour becomes cheap relative to capital, firms will hire more of it, thus increasing the labour-capital ratio and - ceteris paribus - depressing labour productivity. However, there's another sort of production function - the Leontief. In this, there's no substitutability between capital and labour. A given number of machines require a given number of workers to operate them. The capital-labour ratio is then fixed, until new machines are installed.