3 days ago
Why do we need to boost productivity?
INGA TING, ABC DATA JOURNALIST: For those of us toiling five full days a week, the idea of a working four days a week – at 100 per cent of pay – sounds almost too good to be true.
But at the upcoming economic roundtable, Australia's unions will cite research showing it not only boosts living standards, but also productivity.
To understand how that might work, we first need to understand what productivity is, what it measures and what it doesn't.
Put simply, productivity measures how much we output compared to how much we input. It's about quantity, not cost or profit.
Today, the average Australian worker takes just one hour to produce the same amount produced over an entire day in 1901.
That's thanks to a bunch of factors like economies of scale, higher skilled and educated workers, better management practices and - the single biggest factor historically – technology.
A series of reports from the Productivity Commission have highlighted a long-standing productivity problem, showing Australians are working record-long hours and yet productivity growth is at its slowest in 60 years.
And that trend is across most industrialised countries, not just Australia. So how does that work?
Labour productivity typically measures the number of hours it takes to produce a good or service.
This is fairly straightforward when you're looking at manufacturing or agriculture, and measuring, say, the number of cars or tonnes of wheat produced per worker.
But it gets trickier when applied to sectors like care services, health or education, where the maths might tell you that bigger class sizes mean more productive teachers while the reality for students suggests the opposite.
Bear in mind that nearly 90 per cent of Australians now work in the service industry, and we start to see how the way we typically measure productivity is starting to unravel.
The picture gets muddier still, when we consider that labour isn't the only driver of productivity.
Physical capital – like buildings, machines and equipment – as well as intangible capital like intellectual property, also have big impacts.
This chart compares labour productivity to multifactor productivity, which measures the combined input from both labour and capital.
It shows both types of productivity have been declining but capital productivity has lagged labour productivity for the best part of 30 years.
The Productivity Commission has made the same point; that the added hours workers are putting in have not been matched by business investment in the systems and technologies that would allow workers to use those hours more efficiently.
So, can we actually work less but produce more?
The data suggests, yes especially if investments in better management and new technology are matched with less burnout, better staff retention and more motivated employees.
Work smarter, not longer - that's the challenge for next week's roundtable.
