Posted on Aug 01, 2019
The headline is not an attention seeking one of our making. It’s front and centre on the website of the government’s Treasury Department.
They say that “Productivity and labour force participation are the key drivers of economic performance, higher wages and higher living standards. With an unemployment rate that is around the lowest in the world the biggest gains in New Zealand’s future economic performance will have to come from productivity growth”.
We have attempted to consider the causes of lack of productivity, and solutions, as it appears to us that not only is productivity (or lack of it) New Zealand’s biggest economic challenge, it is also one of the causes of our growing economic inequality. And economic inequality threatens to ultimately cause increased social disruption – more than it currently does.
As we research the causes, challenges and potential solutions to our lack of productivity, we become increasingly frustrated. Treasury has done some sterling work in this regard, which can be accessed on their website. But, as with many such reports, much of the language is technical, and there are plenty of disclaimers and assumptions typical of economic analysis.
Then when we look to possible solutions to this lack of productivity growth, very often the touted answer is along the lines of “Let’s embrace innovation and disruptive technologies now. Augmented reality/ virtual reality, Internet of Things, robotics, artificial intelligence, and Blockchain have the potential to disrupt all industries and create new forms of value”
We couldn’t agree more. Obviously new technologies, innovation and the rest will play a major role over time in productivity growth. But unfortunately too often we are far too eager to look to the new, the high tech and the almost science fiction for answers – rather than the more mundane, and dare I say it – the simple.
Yes, we need to support and celebrate tech businesses, research efforts and innovative start-ups.
The other answer is to blame businesses for lack of investment. It is recognised that in New Zealand we have very high hours of work, and high rates of labour utilisation. So the answer is to produce more for every hour we work, by businesses investing in additional plant and equipment and software to lift productivity. That also would certainly help the cause.
So we need to be investing more, and embracing technology.
But there are also answers to easily improving productivity in the short term. Simple answers. There are productivity gains to be achieved by focussing on some of the close at hand, and simple, productivity blocks.
Here are a few obvious starters which could immediately add to the total of the nation’s productivity:
Unfortunately, the very way we measure productivity doesn’t help. Putting out those orange road cones is counted as productive. And so is picking them up. If they ever do get picked up again.