Increasing Productivity

Everyone (well except the Greens) talk about the need to lift our economic growth and increase productivity. Bevan Graham, CEO of the Economic Development Association of New Zealand had a column last week on this goal, and some myths about it.

Bevan firstly points out the debate about economic growth is not abstract. We have slipped to 21st in the OECD for per capita earnings. Hence we struggle to afford the latest cancer drugs while 20 other countries are more easily able to do so.

Bevan deals with three myths:

* New Zealand is a highly entrepreneurial economy
* New Zealand is a country of SMEs
* New Zealand is better placed than many comparable countries because our workforce isn’t aging as rapidly

Looking to the future he says:

In fiscal and economic terms, that means the tax base of the future (which will fund health, education and retirement incomes) will become increasingly dependent on the wealth generating abilities of a group that might not have many of the core skills needed to participate in a high-wage economy.

Also a useful definition of what higher productivity means:

It doesn’t mean getting paid more for doing the same job, it means upskilling and getting rewarded for doing work of higher value. It requires a real transformation.

This is why wages increases for people just doing the same job, don’t help the country much. They in fact make us less competitive.