The problems with productivity

New Zealand’s low productivity levels have been in the media this week. The latest OECD figures show we Kiwis work 15 per cent more hours a year than the OECD average, but despite the longer hours produce 20 per cent less economic activity per hour.

The report said New Zealand’s productivity growth rates were in the bottom third of the OECD, sitting alongside Slovenia and the Slovak Republic.

New Zealand workers have only received about 49% of the increases in labour productivity – maybe less – in the last two decades. Owners and shareholders, are getting a bigger share of total output and returns at the expense of employees.

So it’s clear productivity is not a sign of how much we work, and nor is it a measure of economic or other wellbeing for workers.

I agree New Zealand needs more investment in research and development; that will help us adapt to our changing world. But we need to question how our system is working – is it mainly poor management or insufficient capital that makes each hour of work produce less than elsewhere?

The low-wage-long-hours economic strategy that feeds unemployment and justifies below poverty level income support payments is not serving us.

Neither will perpetual growth. We live in a finite world and our economic models do need to start recognising that.

10 thoughts on “The problems with productivity

  1. Jan says “New Zealand workers have only received about 49% of the increases in labour productivity – maybe less – in the last two decades. Owners and shareholders, are getting a bigger share of total output and returns at the expense of employees.”

    If owners got a bigger share than 49%, then they would have had to get 51%.

    But the you’ve failed to factor in that many prices have come down.

    An average 2 litre car in the 1980s cost $30,000. That’s $107,000 in todays money.

    So the largest benefit from increase in productivity has been to consumers. So if workers also got 49%, how much does that leave for shareholders?

  2. But we need to question how our system is working – is it mainly poor management or insufficient capital that makes each hour of work produce less than elsewhere?

    If Jan treated this blog as something other than a write-only medium, then she would already know the answer to this question.

    And the answer is not an option in that list.

  3. Key govt too often( maybe always?)rip off the poor to subsidise/induldge those few riches…
    They love low wage long hours slaves !!!

  4. The NZ productivity growth rate also sat alongside Australia, though they have richer industries and so each hour worked there brings in more money.

    So what is Jan suggesting, given her correct observation that “perpetual growth” is not serving us?

  5. Agriculture is a low productivity sector. How many times will National ignore this wisdom ?

    http://www.press.auckland.ac.nz/uoa/home/notices/template/notice_item.jsp?cid=572696

    There isn’t sanity in National’s quest to raise our farm output further, we are destroying the country’s productivity by polluting its rivers and breaking the backs of our labour force. “Mexicans with cellphones”. Slaves in our own country.

    Fools who vote for our oppressors.

    I see people who are part of the National party making light of the cleaners in parliament. If they don’t like the job then let someone else who wants it have it.

    Let them eat cake.

    The thoughts share a common failure.

    The people behind them share the delusion that they are somehow better than and have a right to take advantage of, others.

  6. I’m sure it must be a dubious pastime measuring productivity, and then comparing disparate countries. The variances, that were never reported, nor the actual measures included, without challenging the veracity of how those statistics were arrived at in the first place, I would suggest, make the results meaningless and subject to challenge and intelligent argument.

    If you are to accept these results, I suggest that the failure lies in management, especially senior management, who seem to demand excessive salaries without actually contributing to bottom line productivity.

    Rather they restructure, force change, and disillusion the workforce all based on ephemeral promises of increased productivity and profitability, only to fail, resign, accept a massive payout, and move on to another organisation to repeat the process. It seems to work in a 3 year cycle, with each subsequent employer not learning from the lack of performance of the last. Once you reach these rarefied heights as a CEO, you are protected and coddled, despite lack of ability.

  7. no way I’m working fast for low wage used to do twice as much no problem but i will only put in what i get paid now sick of busting my gut for a boss year after year with no pay rise so halved my out put

  8. “I suggest that the failure lies in management, especially senior management, who seem to demand excessive salaries without actually contributing to bottom line productivity.”

    Maybe, but if we’re to point at managers then does it not make sense to also point at the directors and others who hire those managers on those terms? Everyone also has themselves to consider, and few people would turn down whatever salary is available to them if it’s on offer. So if high managerial salaries is part of the problem, what actually causes it?

  9. New Zealand’s productivity per worker or per capita has traditionally been lower than in many other developed countries. One reason is that the bulk of enterprises in New Zealand are small or at best medium size, and they have limited capital and also often staff who have limitations in their skills and qualifications.

    Competing with high productivity countries like for instance Germany or some other places in Europe is near impossible due to lack of potential to develop better performing business operations here.

    Also has New Zealand only developed technological and other products well in some niche areas, while much production and other activity is based on low value added primary products and common service delivery.

    The industrial base here has largely vanished, and with the socio-economic structure and wage and salary expectations of the population, there is little chance of being able to compete with low paid workers in various places in South or South East Asia.

    Agriculture, horticulture and so forth require some well skilled staff, but many working in it are not necessarily that highly skilled and paid, given the nature of their work. There are of course also natural limits to what can be produced per hectare or per worker.

    If New Zealand wants to improve in productivity, major development strategies are needed, and higher investment in research for special areas, probably at the top end of the market for production of high quality goods and services (e.g. more value added agricultural and other goods).

    This necessitates a major change in economic direction, which at least the present government does not have on its agenda.

    Simply producing more of the same and working longer, endless hours does not necessarily result in higher productivity, as statistics show. Also the best of efficiencies in agriculture can be destroyed by a severe drought or other devastating events.

    Productivity would look better if we had not had PSA destroy kiwifruit orchards, if we would not have other pests, if the construction industry had not built many crap building with leaky issues.

    That shows bio-security and quality enhancement are equally important.

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