ECONOMICS Why to Prize Productivity

Rejoice. New Zealand is great country for doing business. At least it was in September last year, when Finance Minister Michael Cullen ballyhooed our rating as the top country in the world “for ease of doing business”. The rating was recorded in report by the World Bank and the International Finance Corporation and put us ahead of 144 other countries.
The areas measured were starting business; hiring and firing workers; enforcing contracts; registering property; getting credit; protecting investors and closing business.
Your columnist’s interest in this news item was not in those ratings, however. It was in finding where the news rated chronologically on the Department of Labour’s website on workplace productivity. He was hunting through “news and events” where “the latest news about workplace productivity” can be found. This section – he was advised – included “recent and archived media releases by members of the Workplace Productivity Reference Group and Government officials”.
Just seven bits of news are recorded. The item about New Zealand being the best country in the world for business was dated 13 September 2005. There was nothing more recent.
The implication is that New Zealand is doing nicely, thank you, with its productivity performance. Not so. On the evidence of the “news” recorded at, however, the Working Productivity Reference Group seems to be taking long summer break.
The oldest news item on the site took us back to March 2004, when Paul Swain was Minister of Labour. He then was announcing the establishment of Workplace Productivity Working Group to advise the Government and said he was keen for the new group to find ways for individuals and companies “to work smarter”.
The group’s aims were to raise awareness and debate on workplace productivity. It would look at successful methods already developed by businesses and find ways to promote the issue to Government and the community.
The announcement was made under the umbrella of the “Growth and Innovation Framework”, the buzz words that justify government intervention in the economy. As Swain explained, innovation is key driver of growth, and the Government has role to play by promoting innovation and productivity improvements. This could be through support for firms to develop highly skilled workforce, an efficient infrastructure, assistance with research and development, and competitive business environment.
On 30 November that year, the Workplace Productivity Working Group published report. This highlighted how much New Zealand must do to boost productivity, given our performance is low relative to many other OECD countries.
“For the first time there is now consensus across government, business and unions for us all to take responsibility for this issue,” Paul Swain then said. The report was “an important step to achieving this”.
The report identified seven key drivers for lifting workplace productivity. These were building leadership and management capability; creating productive workplaces; encouraging innovation and technology; investing in people and skills; organising work more effectively; sharing ideas; and measuring what works.
The Workplace Productivity Reference Group was set up as consequence of this work, linking government, business and trade unions in keeping things ticking along. So what is it up to?
Your columnist concedes he could have resorted to means other than website search to find out. But he reckons if they can’t record it on the Labour Department site devoted to “Workplace Productivity”, presumably it is not worth recording. Anyway, engaging in more exhaustive investigation would be drag on his productivity. Labour productivity, after all, is simply output (in this case the number of words in the column) divided by inputs (labour, or one columnist) and hours.
The Chamber of Commerce and Business New Zealand have published reports on productivity over the past year or so. Business Roundtable chief executive Roger Kerr has written recent newspaper article about it.
Peter Mersi, deputy secretary at the Treasury, tackled the topic, too, when addressing Workplace Productivity Workshop in Wellington in December. No single policy leads to productivity growth, he noted. Rather, it is matter of getting lot of interconnecting things right, and by ensuring incentives are aligned, creating an environment where firms can create and take advantage of opportunities.
Mersi quoted Paul Krugman: Productivity isn’t everything, but in the long run it is almost everything. country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.

Bob Edlin is regular contributor to Management.

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