Productivity Growth

Speaks for itself.

Stolen from Rodney

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Ben Wilson

An unemployment graph over the same period would also be an interesting ‘speaks for itself’ measure.
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April 3, 2006 12:56pm
Paul W

Oh look, a pretty picture! Is this so none of the people reading your Blog need to read the Statistics NZ information note – I guess it contains too many big words?

Do you think the reason Stats don’t try to allocate productivity effects to specific policies is ’cause they don’t understand or ’cause it’s stupid? Even John Howard (David’s fav conservative) said yesterday that he didn’t expect to get a productivity boost out of his labour reforms for many years.

Surely the lead/lag effect of different policies is relevant to understanding how domestic policy, to say nothing of global economic circumstances, impacts on productivity?
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April 3, 2006 12:59pm
idiot/savant

As would I think pointing out that productivity growth under Labour has tended to come from actual capital investment and training, while under National and particularly post-ECA it came from screwing down wages to get more hours worked per dollar. The former leads to long-term increases in real wealth as it improves our actual productive capacity. The latter simply redistributes income upward, while not leading to any real improvement in the long term.
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April 3, 2006 1:09pm
Andrew Bannister

I would expect something like this from the NZ Herald. They’re all for meaningless statistics.

Speaks for itself

Sure says a lot about Rodney Hide.
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April 3, 2006 1:15pm
Paul W

Idiot/Savant: I think you’re right to point out the risk that simply sweating your labour presents to medium-term growth.

Many advocates of the ECA used to argue that driving down wages was their goal and then, simultaneously, ran welfare to work policies to force people into the labour market even when it was financially disadvantageous. Such policies appear to be designed to make the conditions of employment resemble the conditions of unemployment!

Some 7 years after labour reform, NZ has record levels of employment and still the same arguments persist…
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April 3, 2006 1:40pm
Danyl Mclauchlan

Gee – lucky we had that whole worldwide dot.com boom of the 90’s to help us through eight years of National or we’d have been really screwed.
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April 3, 2006 2:05pm
David Farrar

Heh hilarious to have everyone claim you can’t tie this improvement into the policies of the Govts of the time. Because you know not like Labour supporters calim credit every day for low unemmployment despite the fact it has shrunk no faster under Labour than under National post the ECA.

And the reason I posted the graph is because several leftie blogs claimed as a defeat for the right, the fact we have had higher productivity growth since 1988 than Australia. They are the ones who posted meaningless info which did not take into account the different Govts of the time.
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April 3, 2006 2:43pm
Paul W

Yeah Dave, so far no one actually has said that government policies don’t affect productivity, rather I’ve said that it’s a bit simplistic to claim credit for productivity increases just ’cause you’re sitting on the Treasury benches. Still, it was a nice piccie.
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April 3, 2006 3:16pm
Kimble

What has Labour done to improve, or sustain, productivity?
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April 3, 2006 4:00pm
Paul W

Kimble, have you read the report – did you notice the reference in Sage’s own analysis to the increase in employment over the last 6 or 7 years? I stand by my earlier comment that both parties can claim that some of their policies positively affected productivity, neither should overstate their claim.
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April 3, 2006 4:22pm
Kimble

Yeah, but WHAT have Labour done to positively affect productivity?
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April 3, 2006 4:33pm
noddy

I think the analysis that productivity improvements came at the expense of wages (and unemployment) is correct from all I have heard and read.

However, DPF is correct, Labour *is* the Government and has been for a long time now and so it should be very worried about a trend that seems to point to a lack of capital investment. I would love to see some stats that give a bit deaper analysis on this and trend whether our much touted knowledge economy is set to deliver the productivity gains one would expect from such a sustained period of full employment.

If they are not on the near horizon we need to worry.
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April 3, 2006 4:35pm
Idiot/Savant

DPF: Actually, I’m contesting whether it says what you think it says. Multifactor productivity is computed by dividing output by a weighted sum of labour and capital inputs. Drilling into the figures (stats has some lovely spreadsheets), the difference is clearly due to labour input – low in the 90’s due to mass-unemployment, higher now as far more people have jobs (in fact, you can see a clear difference in hours worked, which have jumped approximately 10% since 2000, having remained stagnant since 1989). As Ben points out, what your pretty graph is showing is that people have jobs now, and that in the past six years, employment has been growing. And what you are implicitly arguing is that we should chuck people out of work so as to return to the low-wage, low-skill, sweatshop economy which national clearly favours.

The capital input figures tell an interesting story too – there’s a jump from roughly 2.5% to 3.4% annual growth (driven by the last two years, which are above that). This has likewise reduced productivity and is almost certainly a response to the shortage and rising cost of labour. But it’s exactly this “capital deepening” which will pay off in the long run. There are two forms of productivity growth: those driven by wage cuts and those driven by actual improvements in output. National’s time was characterised by the former; Labour is trying to shift to the latter.
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April 3, 2006 4:49pm
Kimble

But WHAT has Labour done to positively affect productivity?
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April 3, 2006 6:12pm
Mike Readman

A bit funny for Stats to make a graph like this. Insulting their own masters!
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April 3, 2006 6:27pm
Paul W

Reading Kimble’s posts reminds me of the advert for Lots of Noodles where the kid keeps asking the same question; “but what’s it called”?

Read the report.
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April 3, 2006 9:23pm

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