It would help productivity if we were more ambitious, says David Maida
New Zealand's low productivity rating made headlines last month with the country's relaxed Kiwi attitude taking some of the blame.
But there is a lot more to the equation, says Alasdair Thompson, chief executive officer of the Employers & Manufacturers Association (Northern).
"I don't think the Kiwi culture is one that is lazy or unwilling to pull their weight in work. In every area of endeavour, New Zealanders do well. When they go overseas on overseas experience, employers grab them because they're hard workers," Thompson says.
And yet New Zealand ranks ninth from the bottom for productivity - just above the Slovak Republic in the Organisation for Economic Co-operation and Development (OECD) rankings. Luxembourg tops the list of the group of 30 industrialised nations but that may be due more to the high value of its steel exports than the efficiency of its workers. OECD calculations are based on the gross domestic product (GDP) per number of hours worked. Countries such as France, which ranks sixth, appear to have a high level of productivity but its relatively high unemployment works to its advantage.
"Probably a better measure of productivity would not be per person employed but per adult member in the population, because the converse of having low unemployment is that New Zealand has one of the highest participation rates in the workforce in the world. The lower unemployment is, the more productivity per person declines."
New Zealand's unemployment rose for the second consecutive quarter to five per cent, yet the country still suffers from a skill shortage. Thompson says the skill shortage is hurting productivity and we need to focus on education.
"The fact that we have around one-fifth of people coming out of their 11 years of compulsory education unable to read, write and do sums adequately means that you've got a lot of low-skilled or unskilled people in the workforce."
He says schools should be focusing more on science and technology. But unfortunately when people go to work, the workplace itself may not be that technologically advanced.
"It's not necessarily the worker that is responsible for that. It may be especially if the worker isn't very skilled but it is more likely to be that what they are working on isn't of high value or that they're not assisted with sufficient support from technological investment."
Certainly additional training is always helpful. But there are some overriding issues which influence the productivity of all New Zealand organisations.
"It's not a question of our workers being thick or unskilled or lacking ability or lacking the willingness to work or work hard, that's not the case. The case is that there are not enough businesses in New Zealand turning their attention to producing high-value tradable goods and services."
Thompson says we don't really have an attitude problem but perhaps there might be an ambition problem.
"Our business people are, in the main, small and their aspirations are not to become wealthy exporters. We have very few companies that export."
The OECD views New Zealand's low productivity score as our greatest medium-term challenge. OECD Secretary-General Angel Gurría visited Wellington in July 2008 and highlighted New Zealand's sagging productivity levels.
"New Zealand's GDP per capita level remains significantly below the OECD average. This essentially reflects low hourly labour productivity," Gurría told the Chamber of Commerce.
One thing government can do to lift hourly labour productivity is to create a business-friendly environment, Thompson says. But an OECD report in April 2009 said the previous government missed a good opportunity when the economy was doing better.
"The policy focus on productivity and growth eroded during the years of economic buoyancy, while other countries advanced. Notably, a large amount of new regulation, at times poorly designed, co-ordinated and focused, was introduced. Such measures have increased the costs of doing business and sent bad signals to foreign investors," (OECD report - Economic Survey of New Zealand, April 16, 2009.)
Thompson agrees New Zealand missed a chance to become more productive when the economy was better.
"One feels that because we were living in comfortable times, they weren't truly focused on increasing productivity through things like promoting innovation, research and development, company investment, being business friendly and encouraging success in business," Thompson said.
Businesses seeking to improve productivity also need to consider exporting.
"Businesses need to seriously focus on things that they can do that they can sell overseas and not just in the domestic market. They need to achieve the highest level of output that they can with the lowest level of labour."
New Zealand also has an issue with the value of what is produced per one hour's unit of labour. Exporting fresh fish and meat is great, but there is little added value compared with the manufactured products of other countries.
Benedikte Jensen, spokesperson for think-tank The New Zealand Institute, says there are two ways to increase productivity - improve efficiencies around producing an output or raise the value of the output.
"You can look at what's getting in the way of New Zealand companies reinventing themselves in a way that they move their product lines up the value chain to a much higher value-added product," Jensen says.
She says raising the bar on the quality of our goods and services will certainly reflect on the country's productivity score. Jensen says it's important to involve workers with the innovation process at the firm level. It might require some capital investment, but raising the value of the product or service will justify it. Increasing the level of technology available for workers can also pay off.
"We've got a very low level of capital intensity which really means the amount of technology or machinery that each worker is using."
In certain industries, such as forestry, technology is increasing faster than the skills of the workforce required to use it.
"In the manufacturing area, you need people with good core skills to be able to apply the new technology to raise productivity."
Jensen also points to exporting as one of the most important ways to amplify productivity through increased sales.
"Larger companies can have higher productivity simply because for a given set of machinery, they're producing a much bigger output. But to have that scale you need to play to big markets."
Jensen says the Kiwi attitude does play a part in how we think of our productivity Kiwis want fairness and equality and can sometimes feel uncomfortable being ambitious in a business sense.
"If you look at the United States, there is a sense that the culture is different and there is more ambition and aspiration. You have all these success stories and being successful is a badge of honour."
Contact David Maida at:
www.davidmaida.com
