Good post on the Productivity Commission blog, Prod Blog.
When it comes to labour productivity, or productivity more generally many people in society assume that an economist saying “productivity is low” is the same as saying “people are lazy”. But this is far from the case. Lisa Meehan clears that up for us:
Poor labour productivity doesn’t mean that Kiwi workers are lazy. Labour productivity measures how much output is produced per hour worked; it doesn’t tell us anything about how hard we’re working. In fact, as we discuss in our paper, New Zealanders work long hours compared with the OECD average. The problem is that despite these long hours, NZ has low GDP per capita – that is, the problem stems from poor labour productivity.
Put another way, ‘labour productivity’ is a convenient (and useful) metric to think keep tabs on our wider productivity performance. But, by itself, the catch-all labour productivity measure tells us little about the performance of workers alone.
Personally, I’ve had many people get quite angry at me about the idea that productivity is low – they will scream about how they are working as hard as they can, and trying to produce the best work place environment that they can. And economists are definitely not claiming otherwise.
The key point is that the value of goods and services produced for each hour of work we are putting in is lower than many other developed countries. What this means is an important question, and one that helps to guide the idea of where policy can help. As Lisa says, policy sets the rules of the game – and the ultimate goal of these rules should be to engender a situation that allows the preferences of individuals in society to be satisfied in a way consistent with our view of “social welfare”. When the rules are inappropriate for these aims, there is scope for government to help out.
Sidenote: I see this:
He’s been getting a bit of a hard time around the office from those of us who think this is all part of his plan to win the title of ‘NZ’s sexiest economist’.
I will keep Paul Conway’s name in mind when asking for nominations next year – I suspect I’ll have to think about next years vote more carefully than this years, there may need to be categories.