The corporate media, economists and employers are complaining that productivity in Australia is too low. In fact some describe it as a national disaster. But is it even a problem?
The Reserve Bank of Australia explains productivity thus: “In economics, productivity refers to how much output can be produced with a given set of inputs. Productivity increases when more output is produced with the same amount of inputs or when the same amount of output is produced with less inputs.”
Employer groups have long argued for lower taxes to use the resulting higher profits for more investment, into the latest technology (and inevitably into technology that replaces workers).
Australian Bureau of Statistics data shows a multi-factor productivity, which is a combination of labour and capital productivity. The conclusion is that capital productivity has not added much to raising productivity in recent years.
Ian Verrender from the ABC argued on May 27: “In most cases, [improving productivity] is through investment in better equipment or technology for workers. Often, it is through better management practices.” He added that “while the business lobby groups bang on about how governments need to reduce red tape, lower taxes and keep wages under control, the solution largely is in their hands”.
But increased profits do not automatically lead to investment that would improve productivity. As Verrender noted, “When interest rates were declining after the GFC [global financial crisis], most big corporations handed back their improved earnings to shareholders as bigger dividends.”
David Peetz, Professor Emeritus at Griffith University, argued in The Conversation: “The biggest single factor that shapes productivity is technology. Who’s responsible for what technology a business introduces? Management. Workers often don’t have much of a say … Output will also be better with an educated and skilled workforce. If people can do more things with their brains, they’ll be more productive.”
Technology and productivity
Improved technology can lead to higher productivity. Output will also be better with an educated and skilled workforce. So employers and governments have to invest in training and education. But these costs have been shifted onto individual workers themselves — huge HECs debts, low wages for apprentices, defunding government educational institutions, little money for professional development and so on.
Under capitalism, increased productivity means work harder, longer and unsafely.
The business lobby is concerned about “low productivity” because they want to increase their profits. However they are not interested in spending more on training workers or investment in the latest technology. Instead, their usual proposals include cutting red tape, lower company taxes and intensifying work conditions.
Mainstream economists try to disguise the fact that higher productivity mostly means intensified exploitation of workers with the cliché, “working smarter”.
Aaron Wong, senior economist at the e61 Institute, argued in The Conversation, “Productivity is a much-maligned term, often thought to mean people working harder or longer. But that’s not what it means ... Being more productive means getting more for the same amount of work — working smarter, not longer.”
“Cutting red tape” usually means reducing or eliminating regulations, or rules, that employers see as hindrances to making profits. Such regulations frequently involve health and safety requirements and cutting them allows for work to be intensified.
This often leads to accidents, injuries and stress for workers. Work-related stress happens when demands exceed the resources we have for managing them. Safe Work Australia reported that in 2023 200 workers died from traumatic injuries and claims for mental health conditions continued to increase, now accounting for 10.5% of all serious claims.
“The median time lost from work in these cases is more than 5 times that recorded across all injuries/diseases,” it said. Mental health conditions accounted for 10.5%, or 14,600 serious claims in 2022-2023, a 19.2% rise on 2021-2022, and a 97.3% rise compared with 10 years ago.
The Australia Institute’s Go Home on Time Day 2024 survey, found that more than a third of bosses still expect staff to work more than their rostered hours — for nothing. It also found that people are working an average five weeks’ unpaid overtime, with 42% saying the extra hours make them physically tired, 32% say they feel stressed or anxious and 29% report it interferes with their personal life.
More than one in five said they are left sleep-deprived with the most common reasons for working those extra hours being too much work (41%) and staff shortages (31%).
Work-life balance fairy tale
The notion of work-life balance is a fairy tale for most workers. Many find juggling family commitments and work demands tough. Working from home has become a relief for many women, in particular, because it eases some of the tension between the demands of home/family and work.
But increasing productivity does not automatically lead to higher wages. Wong argues that increasing output and decreasing prices are the main drivers of higher wages. “It means you’re able to purchase more (or better quality) goods and services as their relative costs go down and incomes increase.”
Peetz argues that a lot of reforms advocated in the name of productivity growth “have quite different aims and effects”. “Productivity growth once drove living standards. Not any more. In theory, higher labour productivity enables higher living standards. In practice, that is driven by the ability of workers to negotiate for higher wages.”
There is no guarantee that productivity growth leads to higher incomes. Any significant wage rises workers have won has been through united industrial action.
Lower productivity is not always a problem.
Peetz argues that lower productivity isn’t always a bad thing. “Sometimes higher selling prices can lower productivity. It seems odd, but works like this: if prices for commodities such as iron ore or coal are high, it becomes profitable for mining companies to dig through more rock to get to it.
“This takes more time. But it’s now worth extracting these small quantities, because they’re so valuable. For this reason, with high commodity prices, mining labour productivity fell by 13% between 2019-20 and 2022-23. Mining productivity had the largest negative impact on national productivity growth in 2022-23.”
Furthermore, he said, the way productivity is measured matters. There will be problem areas, such as the productivity of artists, writers, comedians and the services industry, which is a very important and large section of the economy. Australia’s service sector provides 88% of total employment. Not surprisingly, some parts of this sector, the labour-intensive and face-to-face services have demonstrated low productivity growth.
“Productivity is higher in classrooms when there are fewer teachers per student,” Peetz said. “At least, the bean-counters will tell you that, but the students will tell you the opposite.”
Similarly, the higher the ratio of workers to residents in aged care homes, the better for the elderly. But their productivity rate will be lower.
How should the economy be measured?
Socially necessary and useful production, where workers have a say over what is produced and what their working conditions will be like, must be the standard.
But many politicians and CEOs argue that workers should not receive pay rises unless their productivity has risen, an anti-worker view. But when it comes to their bonuses or pay packages, productivity is forgotten.
Australia is a rich country with a strong economy. Workers have built the country and they deserve high wages, regardless of arbitrary output measures. What counts are workers’ wellbeing and health. Those that do not agree should look at their own productivity rates.