Declining productivity isn’t purely an Australian problem, as Saul Eslake and others have pointed out.
OECD figures show that labour productivity growth was lower between 2000 and 2010 than between 1990-2000 in 21 out of 35 OECD economies. A number of other governments, like the New Zealanders, are also puzzling over what has happened to productivity and how to fix it.
The best labour productivity performers in recent years have generally been ex-Eastern bloc countries. Countries like Russia, Slovenia, Poland, Hungary and the Czech Republic have all racked up strong annual increases in labor productivity. So too has South Korea, which has had a consistently strong productivity performance since the end of authoritarianism in the late ’80s. That suggests a key cause of high labor productivity growth is coming off a low base, an option not really available for us. Saliently, however, even a mature economy like Japan has outperformed us in labour productivity.
What’s interesting is where Australia sits in the OECD on labour productivity over the last 20 years, despite a general productivity malaise setting in in developed economies. There are data gaps for some countries, so one shouldn’t load too many conclusions onto the numbers, but overall in the last 20 years, Australia was 21st out of 35 OECD countries in total labour productivity growth. And we’re 19th since 2000.
But the OECD also calculates productivity growth using 2005 as a base year. Between 2005-08, Australia’s labour productivity performance was so poor we slipped to 28th, down amongst the sclerotic French, those socialist-minded Swedes and the Canadians. That period of course almost perfectly coincides with WorkChoices — but also with the mining boom and the drought, two of the usual suspects for the fall in our productivity in recent years.
No wonder Judith Sloan, who has made a career from demanding IR deregulation, recently claimed that “fiddling around with periods of different labour market regulations and trying to line them up with macro figures on productivity, particularly changes in labour productivity within incomplete cycles, is a futile and unconvincing exercise.” In short, ignore all those company executives and industry peak bodies currently insisting our productivity performance means we need more IR deregulation. Or, at least, don’t bother looking for any evidence what they’re saying is true.
One of those executives has been Heather Ridout, who had an interesting “I’m not a protectionist, but…” piece in the Fairfax press today that, stripped of verbiage, in essence demanded tight regulation of private procurement processes to provide for transparency, to enable local suppliers “full and fair access”, to compel publication of local participation levels, to impose timing requirements on major projects to suit local providers, and the imposition of tougher standards to block out cheaper, allegedly poorer-quality foreign products. It seems Ridout’s deregulationist mantra vanishes when it comes to trying to force other sectors to increase their use of local products. Ridout complains of “predictable knee-jerk name-calling” when this is labelled protectionism.
Perhaps she should pick up an economic textbook. What she proposes are normally called “non-tariff barriers” and they’re the most popular form of protectionism since the advent of the World Trade Organisation.
A random thought regarding productivity – in particular in the mining arena where I have seen a sea change over the past decade.
The safety systems have gone from being fairly casual to intense. Layers of systems and permits make it difficult to gain any headway and to get the job done.
As a good engineer I have always applied productivity factors to tasks but these keep on going up – or shall we say the non-productive portion of time allocated to a job is constantly increasing.
An example, to open a dozen bolts on a flange and insert a blank into a line that contained air pressurised to about what you would fine in a can of coke (seriously) took half a day and three levels of management to authorise. It took two guys ten whole minutes to do the task. Productivity multiplier – about x50!
Clearly I do not want to die at work but I am unconvinced that all the layers of safety actually make things safer – they cover management in the event of a court case – and that seems to be their only function.
The logical extension is gloves and goggles to operate an office stapler – after filling in half a dozen forms and evacuating the office.
The nations who have improving productivity are those who have work practices made unhealthy by past regimes – we it seems are passing them in the other direction, not due to a central authority but due to the nebulous and constantly changing safety requirements we experience daily down at the work face.
It’s always amusing listening to middle-aged white-men – like Beanard Keane, Glenn Stevens, Ross Gittins – sit around penning their denouncements of those who say we have a trade problem in Australia. Comfortable in their jobs, with secure superannuation, houses paid off, kids at Uni or better yet already in the work force.
This mostly self appointed economic and political elite have almost to a man never run a business and had to compete against multinational corporations who use a toolkit of endless new instruments to reduce their taxes and rig the race in their favour.
Like the English of South Africa in the olden days, this middle aged white male elite talk the good fight for neo liberalism and free markets at the dinner parties, condemning anyone who questions why steel is so cheap from China. Because at the end of the day they have their money nicely stuffed away in blue chips and the like – making sure to help themselves to a share of the spoils but never taking responsibility for meeting a wages bill and keeping legions of the riff raff employed, fed, clothed and housed.
Oh to be white, male, middle aged and living in denial that Australia has been well and truly rooted by a free market that does not currently exist.
@ Trash:
It’s not just the mining industry.
Newcastle City Council has been fighting in public and in private for a couple of years over whether or not to remove two dozen fig trees out the front of an art gallery and a library.
They have withstood wind and rain and 70 years and an avalanche of risk assessments, legal opinions and physical investigations, yet the fight goes on. I believe that the cost is now over $700k anf rising.
They’re still there.
Legal opinions have been opined and in junctions injuncted, motions passed, rescinded and passed again, yet they are still there.
Today, with winds up to 100kph, they are still there.
Yet the fight goes on.
Only a lucky, stupid, risk-averse, legalistic, bureaucratic, self-important hierarchical organisation could permit this situation to develop, and then only in a lucky, stupid, risk-averse, etc country like Australia.
The mining industry and Newcastle City Council’s mandarins have one thing in common with the Helen Ridouts of the world – they are amongst the lucky few who have absolute security of tenure and flexible performance parameters which allow the luxury of working while achieving absolutely nothing.
No doubt the real reason for declining comparative labor productivity isn’t due to them and their ilk… or is it?
Bollocks! Firstly I wouldn’t take anything seriously that bunch of globalist free lunching, first class travelling tossers said. Their prescription is the same old “cut wages and improve productivity” formula their buddies at the IMF and the World Bank have foisted upon a pitiable Third World for the last 50 years. One thing is for sure; the average guy isn’t going to benefit from this productivity.
Australians are working more hours than most as it is, in an attempt to keep up. Forty five percent of us say we are worse of this year than last and I am pretty sure we aren’t free lunching or spending excessive time on Hayman Island.
This try-on is only about cutting wages and bringing us closer to the Chinese scales of pay; the goal being to have the whole world meet somewhere in the middle, well below current Western rates of pay. I didn’t know they were trying this on in Oz and K1 already; they still haven’t finished doing over the US and the UK.
As for our limp-wristed, global-warming- fixated union movement; where are they when they are needed! I reckon by their actions they (the union leaders I mean), are about 90% sold out to the internationalists under promise of great big UN jobs and leadership forum positions. They along with the political tits running this place seem content to stand by while the fires burn strong and bright without even looking for the hoses.
While the too big to fail banks continue to get bailouts by the dozen, the rest of us are copping heartaches by the score. Tell the OECD to drop dead!
The aim of neocon (the emphasis being on con, nowt new about it) capitalism is a race to the bottom for workers. When the bottom is reached, excavation will begin.
Always fascinating that workers need to be paid less, otherwise they’ll enjoy life too much and not work their guts out but the fatcats need to be paid unlimited sums to incentivisate them.