Productivity not as poor as depicted
New Zealand’s track record on labour productivity may look worse than it is because a growing number of Kiwis are in work, the Productivity Commission says.
The country’s sluggish productivity growth was highlighted in an OECD report into the New Zealand economy in June and threatened to become an election issue.
Labour finance spokesperson Grant Robertson said this month that National Party leader Bill English’s claim that productivity had grown pretty well in New Zealand was wrong and contracted the views of most commentators.
Productivity Commission research director Paul Conway
'The skill level of the average Kiwi worker fell by 1.8 per cent between 2001 and 2012.' Motu
pointed to research from Wellington economics firm Motu.
It suggested annual productivity growth would have been about 70 per cent higher, averaging 0.24 per cent, between 2001 and 2012, instead of 0.14 per cent, were it not for a decline in skills associated with higher employment.
Motu estimated last year that the skill level of the average Kiwi worker fell by 1.8 per cent over the period as more people joined the workforce.
The negative relationship between productivity and labour market participation has been accepted by the OECD.
In 2007, it said there were a number of reasons one might expect labour productivity to fall as work opportunities increased.
These included employment growth increasing the proportion of lower skilled workers in jobs and the fact people would be less productive on average as they worked longer hours.
But the commission accepted productivity had been ‘‘comparatively poor’’ for decades, also blaming small markets, low rates of capital investment and R&D and weak competition.
More people in work is a good thing but makes productivity growth look worse.