A neat article (on Prod Blog here), and corresponding paper, by the Productivity Commission on New Zealand’s productivity performance over the past couple of decades. This is a descriptive paper, which runs along side the recent productivity symposium, and the upcoming set of papers which will turn up in the Productivity Commissions ‘Productivity Hub‘.
“Productivity” is not a goal – however, understanding why New Zealand’s productivity performance has been lower than other countries, and the way policies and institutions influence this, is very useful.
It helps us ask where we are relative to our “production frontier” and helps us try to understand the costs and benefits associated with policies in more detail.
I especially enjoy the sectoral decompositions that the Productivity Commission uses to indicate that the productivity problems New Zealand seems to be facing are relatively widespread – even if the nature and level of the performance gap is very divergent. Namely:
At the industry level, the level and growth rates of labour productivity are diverse. Information media & telecommunication and finance & insurance, two ICT-intensive industries, have been strong performers. At the other end of the spectrum, the construction industry and some service industries have detracted from aggregate productivity growth. The 2000s slowdown in productivity growth was broad based, with almost all industries experiencing slower growth, particularly in MFP.
This is undeniably an important area to try to understand, one that corresponds to part of the “problem” in so many policy questions swirling around New Zealand at the moment. Even when I am questioning whether it is really fair to view this performance as a paradox (given the it may imply to some that this is something we can’t understand and/or that the core of our current explanations is wrong – which are untrue statements), I more than appreciate how important it is – one of my first article substantial articles after a couple of years of work was on the poor labour productivity performance of New Zealand in the “Supersize New Zealand” booklet by the Centre for Independent Studies.
But as Treasury notes with their living standards framework, and as I noted when blogging about my article back in 2009, productivity in of itself if only part of the picture. By asking “why” like the Productivity Commission is doing we do more than figure out why our productivity performance is low and how to improve it – we may just figure out the more important question of how this question of productivity fits into the full suite of factors that influence the wellbeing, and ability to achieve wellbeing, for New Zealanders, and how policy can improve that!