“Productivity is commonly defined as a ratio between the output volume and the volume of inputs. In other words, it measures how efficiently production inputs, such as labour and capital, are being used in an economy to produce a given level of output.”
New Zealand has had low productivity for decades, and it shows no sign of catching up with other OECD countries. Why? It isn’t from a lack of hard work. As reported in 2013:
Kiwis work longer, produce less, says Commission
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On average, New Zealanders work 15 per cent longer than the Organisation for Economic Cooperation and Development as a whole and produce about 20 per cent less output per hour worked, according to the commission’s report ‘Productivity by the numbers: The New Zealand Experience’….
An interesting piece (by Fiona Rotherham) on Stuff yesterday throws some light on the matter:
New Zealand productivity still lags
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A new report from the Organisation for Economic Co-operation and Development says New Zealand still has a large productivity gap (27 per cent) to other OECD countries because of a lack of investment in “knowledge-based capital” and international connections.
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It says New Zealand’s policy settings should generate gross domestic product per capita 20 per cent above the OECD average, but we are actually more than 20 per cent below average. This affects New Zealanders’ income and wellbeing and comes in spite of the economic upswing.
Distance is one important factor:
More than half of New Zealand’s productivity gap relative to the OECD average is explained by weaknesses in our international connections. … While not much can be done about its distance to markets, New Zealand’s two-way trade flows could be altered to reduce its impact.
But there are others:
…the OECD work finds the gap reflects weakness in knowledge-based capital which has become increasingly important in driving productivity gains in the digital age. Knowledge-based capital ranges from things like product design, inter-firm networks, research and development, and organisational know-how. While New Zealand ranks well in software investment and trademarks, the amount of R&D undertaken by the private sector is among the lowest in the OECD.
Our private sector is not pulling its weight on R&D. Furthermore:
Cross-country surveys also show the quality of management is below average in New Zealand, which lowers productivity gains from new technology.
So, our below average management is not investing enough in R&D and not dealing with the challenges of our distances to markets. This is not the first indication that the country is held back by poor management. Much as they like indulge in their own self importance and tell the rest of us how things should be done, our “business leaders” are doing an objectively poor job.
Perhaps instead of insulting Kiwi workers as “pretty damned hopeless”, Bill English should be taking aim at these captains of industry.
And of course, what productivity gains there are never seem to filter through to workers:
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