Productivity is New Zealand's biggest economic challenge

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:

  1. Imagine if even a small percentage of businesses did what they said they were going to do. Just imagine the additional productivity if we had not had to make 15 calls to the engineer who promised drawings 6 weeks ago – and still hasn’t got them to us. Or six calls to the salesperson who still can’t tell us whether they can offer the piece of machinery their website says they can. And that’s just the private sector. If Council ever got their act together it would blow productivity off the scale.
  2. Put artificial intelligence to one side for the moment. Think about how much productivity we could gain if a little common sense, which is after all just a watered down version of intelligence, was applied in some everyday settings. Such as  when you shut down a production line for maintenance, and then the maintenance man doesn’t turn up as scheduled and didn’t tell you. Just by lacking common sense – or even common courtesy – there is plenty of production lost.
  3. Procrastination: Where would productivity be if even a few did the job now, instead of procrastinating until tomorrow, or next year. It’s great to put road cones around the pothole. But if instead you filled the pothole in, then you wouldn’t have to put the cones out and then pick them up again. And you would be on to the next job super quick.
  4. According to the media, the average Aucklander wastes 85 hours a year in traffic. How much quicker could those road works be completed if the machinery working on them was working not just 40 odd hours a week, but more like 140. That doesn’t require much more investment in plant and machinery to immediately increase our productivity.
  5. And of course if we were all to speak a language which eliminated “corporate claptrap” it would save a heap of time trying to interpret what people were really trying to say. I wonder whether I need to bring out my self defence skills, or thank someone from trying to save me from drowning when they are “reaching out” to me. But it is not just “reaching out” that the productivity killers are doing. They are also “doubling down”, “ratcheting up” and “moving forward”. Probably all with “110% commitment” in an “utterly unique” way.
  6. The smart phone is an incredible tool. We are told it has thousands of times the computing power compared to the computers that guided Armstrong and Aldrin to the surface of the moon. And if it wasn’t predominantly used for gathering Instagram likes or sending emoji laden texts, it could potentially add greatly to our national 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.