Poor productivity, poor Kiwis
Lifting productivity is the top consideration of the new Government, but you could be forgiven for missing this memo.
It’s never easy losing your job. I’ve been there and it’s tough. Not only is your income severed, your pride takes a big hit. Harder too if you are part of a public narrative like “Wellington workforce reeling from public job cuts”.
However, there is always a back story to consider. This back story is New Zealand’s low productivity, one that needs to be told for the sake of our economy and our well-being.
Kiwis work longer hours but produce less than other First World countries. Our biggest problem as a nation is our low productivity.
If we worked the same hours but more effectively we’d be a much wealthier country, one that could afford to pay our teachers, nurses and police more. If we’re content with what we produce now, higher productivity could be achieved by working fewer hours to produce the same output. But I doubt few believe the state of our economy is where we want to be.
David Seymour said before the 2023 election: “We like to believe New Zealand is a rich country, but we’re not. For every hour we work, New Zealanders produce 23% less value than Australians or 41% less than Americans.”
Today’s top political issues such as housing, cost of living crisis, welfare payments, health and education services all loop back to poor productivity. When we produce more we are wealthier, when we are wealthier we can better help those in vulnerable situations.
Government sticking to its knitting and only providing what people can’t for themselves is also important. It shouldn’t tax people in order to provide goods and services the private sector produces more efficiently at less cost.
Low productivity has plagued us for around 50 years. To get out of this bind we must produce more with what we have – our people with their knowledge and skills, capital produced and natural resources. We must embrace automation, but that means the unskilled in society have to upskill and re-train. Then there will be more to go around for current and future generations.
Lifting productivity is the top consideration of the new Government, but you could be forgiven for missing this memo. Maybe ministers aren’t saying we need higher productivity often or loudly enough. To be fair, they are. Pre-election, all three coalition parties talked of the need for more effective government spending. Now this plan is being implemented. But that messaging isn’t being picked up by a media in the midst of a productivity crisis of its own.
Instead, reporting is squarely focused on public sector job losses, with the wider context lost in the ether. Focusing on departmental headcounts and job losses is problematic, as it doesn’t look at what is being produced, what is working and what isn’t.
The narrative has been on the numbers of jobs lost, against background job growth of 13,000 in the public service between 2017-2022. This would be OK if more is being produced, but it isn’t.
Some job losses were inevitable with a savings directive from Government, but that shouldn’t be the starting point for cuts. Good businesses (yes, the public sector should operate using business practices) regularly review what they produce to ensure intended outcomes and value for money. Programmes with good outcomes should continue but poorly performing initiatives should either be amended or stopped.
The public service must observe this prudence with greater enthusiasm because taxpayer funding is at stake.
Finance Minister Nicola Willis is a strong advocate of the social investment approach which creates a feedback loop for decision-makers on the basis of performance of interventions and services. This facilitates well informed decisions about whether initiatives should continue, or not. More of this thinking is desperately needed if productivity is to improve.
Innovation through new technologies is important too. It stimulates investment in research and development and leads to long-term economic advancement.
Every Kiwi should think of themselves as a shareholder of NZ Inc because it changes the way we engage in the debate. We should demand a return on the investment we make through paying taxes to ensure the government, as kaitiakitanga of the public purse, is spending wisely on our behalf.
Increased productivity drives economic growth through more efficient use of resources. Then businesses can afford to pay workers more, and the government can pay our teachers, nurses and police more appropriately.
A productive economy competes more effectively in global markets, attracting more customers, migrants and generating greater profits. Higher earnings mean the tax take is greater and inflation is reduced by producing more without prices increasing.
Ultimately, higher productivity means a higher standard of living for New Zealanders. This is what we must strive for. The rising tide lifts all boats.