I had to check up a specific productivity number this morning and noticed that it had got to the time of year when the OECD finally has a complete set of real GDP per hour worked (labour productivity) data for 2022. Data for 2020 and 2021 had been messed around by Covid disruptions, and measurement challenges around them, but if the illness was still around in 2022 the direct disruptions mostly weren’t.
Anyway, here is how the chart of labour productivity levels looks across countries
If you want, you could ignore the countries at the very top (notably Ireland, where the data are badly messed up by international tax distortions) and the Latin American OECD diversity hires at the very bottom. But it is not an encouraging picture for New Zealand.
Last year, the Secretary to the Treasury commented on some measurement work that Treasury and SNZ had been doing that suggested, on plausible grounds, that our hours worked numbers may overstating how they would look on a properly internationally comparable basis. She suggested that if such an adjustment was made – and it was for a variety of other countries last decade – it could lift GDP per hour worked by up to perhaps 10 per cent (wouldn’t change GDP per capita or wage rates of course). If we were to add 10 per cent to the New Zealand number in the chart above we’d be around where Slovakia, Slovenia, Japan and Israel are now.
But if there is something to that point – and there appears to be – any such adjustment would affect all the historical data as well, so that the growth rates over time won’t be materially affected, or (thus) comparisons of how New Zealand has or has not dropped down the OECD league tables.
A little arbitrarily, I wondered how New Zealand had done on that count over the last 10 years. Ten years is a nice round number, but it also happens to encompass a period half governed by Labour and half by National
Here I’ve shown the (ranked top to bottom) levels of real GDP for 2012 and 2022, and in the final column I’ve identified where a country has changed by more than two rankings over that decade.
Most of the material movements are in the bottom half of the table. There are some stellar performers, most notably Turkey and Poland. And there are some really really mediocre ones: Portugal and our own New Zealand. We’ve dropped six ranking places in a club of only 37 members in just a decade. It took me a little bit by surprise, and I think partly because the New Zealand debate (such as it is) rarely focuses on the countries that are now most similar to us in productivity terms.
Just as context, I then dug out the numbers for 2000. As it happens, the New Zealand ranking in 2012 was exactly the same as it had been in 2000. It is over the last decade that the decline down the OECD league tables has resumed.
Productivity growth is, ultimately, the basis for so much that people want for themselves and from their governments. “Productivity” isn’t the language of the focus groups or polls that seem to drive our politicians these days, but it is a critical New Zealand failing. We aren’t getting poorer in absolute terms, but we drift behind more and more advanced countries in the wages we can support, in the public services we can offer our citizens, in the private goods people can afford to purchase and enjoy.
But there is no sign that either of our major parties (well, or the minor parties) care, or have any ideas, any credible narrative, to reverse our economic decline. It is followership at its worst: competing in the race of “I am [aspire to be] their leader; I must see where they are going and follow them”. Real leadership would be something quite different than just rearranging the deck chairs, competing as to who can offer the best handouts.
I’m occasionally inclined to defend our politicians on the basis that our economic agencies don’t have much to offer them, but (a) those agencies have been degraded by much the same sort of politicians (in some cases, one lot did it, and the other lot keep quiet), and (b) real leadership seeks out, draws out, invites, examines, tests, scrutinises ideas and evidence, drawing around him or her advisers who could inform a better way, that a leader might champion, persuade and so on.
But neither Hipkins nor Luxon – or most of either’s predecessors – seem cut from that sort of cloth, perhaps not even interested or aware of what they don’t do or offer. Both seem content to preside over drift, just so long as they and their mates get to hold office rather than the other lot.
croaking cassandra 
I’m always intrigued by the fact that the immediate interpretation of GDP/hours worked or GDP/capita data appears to be mentally linked back to the concept of individual ‘workers’ working ‘hard’, or less ‘hard’ / more or less productively.
We’ve known at least ever since the relentless campaign by the late Sir Paul Callaghan (and others) that other ‘structural’ economic factors play a key role in determining productivity measures related to GDP. What are the relative proportions of people employed in sectors of the economy that are inherently less, or more productive – think tourism and software development, for example?
And even within sectors there are ‘structural’ factors at work when we compare ourselves internationally – take manufacturing as an example. New Zealand manufacturing, outside of food and beverage, has by and large found its global competitive position in short-run niche manufacturing, “making weird stuff that others aren’t good at, or can’t be bothered to make” – to paraphrase Sir Paul Callaghan again. And, as a general rule, labour productivity in short-run manufacturing is lower than in long-run manufacturing – think of scope for automation as a factor, for example. Turkey has grasped the opportunity to massively invest in long-run manufacturing – an option simply not available to New Zealand for a variety of reasons.
What that means is that when it comes to improving New Zealand’s labour productivity, rather than just thinking of “working smarter”, “more automation”, “use of AI”, etc., there is a macroeconomic policy challenge – growth in which part of our economy do we want to encourage, which sectors not so. Not to mention other aspects like creating more jobs on higher wages, or creating more wealth without massively increasing our carbon footprint. Meeting that challenge, however, would require the country’s political leaders of either colour to have a clear and compelling economic development strategy – and good luck with looking for that …
Kind regards
Dieter Adam
Community Champion
MAKE│NZ
dieter@makenz.orgdieter@makenz.org
+64-27-495 3276
http://www.makenz.orghttp://www.makenz.org/
In 1900 the CO2 concentration in
the atmosphere was 295.7 ppm.
It was 311.8 ppm in the year I was born
Now it’s 421.0 ppm – and rising
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Entirely agree that productivity challenges are not at all about workers (or anyone else) working longer or harder.
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This government has been arguably the worst in our history. I don’t think the next one can be as bad.
There is always hope…
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A worker with a bulldozer is more productive than a worker with a wheelbarrow, because (s)he can move more dirt in a day, and is less tired at the end of it. NZ seems to have relatively little investment in capital per employee – too many wheelbarrows, not enough bulldozers.
A nurse working in a well-managed environment is more productive than a nurse who has to waste time working with badly-designed systems, filling out paper forms and getting supplies from far away, because (s)he can treat more patients or give more attention to each one. (And, yes, this aspect of productivity is not measured, but it is still real.) NZ’s management is not of high quality by international standards.
A trucker who can deliver goods on a 110-km/hr motorway for almost the while delivery route is more productive than one who must travel on low-speed roads with lots of traffic lights and other barriers to getting the goods to their destination. NZ’s infrastructure is mostly pathetic (except for broadband, which is excellent).
A Government worker whose job is to identify sections of road where the speed limit should be reduced for safety has a negative effect on productivity. The better (s)he is at that job, the lower the productivity of the whole economy. In recent decades there seems to have been a substantial growth in jobs whose purpose is to reduce productivity.
None of this has any relationship to people working harder or working longer hours. It is about the structure of our society and the things that we value. And productivity is simply not valued.
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Yes, Michael, you are quite right to ask whether any political party cares about productivity. At this time of pre-election madness, offering lollies is much more front of mind! But keep playing the same old records please,…productivity challenges, immigration stupidity, & much more.
Your postings are both challenging and at the same time, deeply depressing. But stuff we all need to think on.
I am guessing, without really knowing, that the productivity picture is even worse than you suggest. If one was able to separate quality of production, it seems that proportionately these days there is a great deal more ticket clipping & taking in one another’s washing, than in days gone by.
My own adult offspring, much as we love them, seem to occupy a different universe, where consumerism seems to be a first priority. Buy now, pay later.
Of course this may just illustrate that I am a stupid old man, looking at the past with rose tinted glasses!
However, I sense, through reading quality comment like yours and the output of the late sir Paul Callaghan, that several “chickens are about to come home to roost”! Our public media is in free fall, unwise immigration policies over several years are causing all sorts of (avoidable) problems, and we all seem to be becoming more reliant on state provision for ordinary aspects of life.
The solutions may be harsh. I doubt that throwing ever more tax monies at problem areas such as health or education, will be easy solutions, And I definitely doubt hoping for a new breed of smarter politicians will be helpful. The last thing we need is politicians “picking winners”!
Sir Paul Callaghan for example, was spot on when he said…”if you want to be poor, promote tourism”. And yet it seems every unit of local government at least, seems to think the opposite.
I think we will see tears.
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