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No hard and fast rule for workers

August 20th, 2011

That cute subeditorial pun is the headline for my most recent Fin column (over the fold).

Ideas are tenacious, and beliefs, once formed, are hard to shake. Even when a theory has been killed by overwhelming evidence, it often returns in a form that is almost impossible to refute. Such zombie ideas can do immense damage. The supposed ‘productivity surge’ of the mid-1990s is one example.

The surge was ‘discovered’ in the late 1990s when the Australian Bureau of Statistics developed new techniques for measuring multi-factor productivity (MFP). Initial estimates suggested that MFP had grown at 2.4 per cent a year in the mid-1990s, a rate unprecedented in Australian economic history, and almost unparalleled in the developed world. The estimates seemed to demonstrate that the Australian economy had entered a ‘new era’ of productivity growth.

The initial estimates were soon revised downwards, and a string of bad results in the late 1990s soon brought the estimates of MFP growth down to more mundane, levels. But the idea of a productivity miracle,, proved hard to shake.

At a Reserve Bank conference held in 2000 I was the sole dissenter on this topic. I argued that the apparent productivity miracle was the product of measurement errors. The most important was the failure to take account of the increase in the pace and intensity of work.

This speedup, and the resulting problem of work/life balance were described by John Howard as a ‘barbecue stopper’. They were apparent to everyone in Australia except the economists looking at the productivity statistics.

Increased work intensity cannot be sustained forever, so my analysis predicted that the above-average productivity growth would be reversed as Australian workers reclaimed control of their lives in a stronger labour market.

Although work intensity can’t be measured directly, we can look at related measures such as the number of people working extremely long hours and the proportion of workers compensation claims citing stress. These measures have generally declined over the last decade.

As we might expect, the decline in work intensity has produced a reversal of the spurious productivity gains of the 1990s. But the economists who talked up the productivity miracle have not changed their tune.

Earlier this week, the RBA held another conference on the Australian economy. As in 2000, I made the case that the supposed productivity miracle, and its apparent reversal, were equally spurious. And, as in 2000, I was almost alone in this view.

There were two kinds of responses to the evidence. The Productivity Commission, has broadly accepted the idea that productivity is mismeasured, but says that is only the apparent decline in the 2000s that is spurious. The PC points to big investments in mining and infrastructure that have yet to pay off.

The dominant view, however, is that the gains derived from the productivity miracle of the 1990s have been frittered away through the lack of consistent microeconomic reform.

This story does not fit the history very well. The period of strong productivity growth ended in 1998-99, when such measures as waterfront reform, National Competition Policy, the GST and privatisation were either underway or yet to come. It does, however, appeal to many economists.

We have seen a string of calls in recent months for a renewed focus on productivity and microeconomic reform. Ordinary Australians understand what this means. A recent speech on the topic by Treasury Secretary Martin Parkinson was reported by two different news organisations under the headline ‘Australians must work harder’. In fact, although Parkinson had not mentioned work intensity, but the headline writers made the connection anyway.

About the only thing worse than being told to work harder is being told to ‘work smarter’. Decoded, this means ‘you have to do more, with less resources, and its up to you to figure out how’.

There are still some gains to be made from 1980s-style microeconomic reform. Price-based approaches to the management of water policy and climate change provide examples. But the challenges we face in areas like health and education aren’t amenable to simple solutions based on prices and incentives.

Australia needs genuine productivity growth, from technological progress, better skills and education and less waste of resources through unemployment and social exclusion. Despite the misleading statistics, productivity from these sources has improved over the last decade, and can be improved further.

Among the benefits of productivity growth should be more leisure and more pleasant working conditions. We don’t, in general, to work harder, and we certainly don’t need to be told to ‘work smarter’.

John Quiggin is an ARC Federation Fellow at the University of Queensland. His book Zombie Economics was published in 2010 by Princeton University Press.

  1. kevin1
    August 22nd, 2011 at 10:09 | #1

    @John Quiggin
    JQ I think you are much too kind. If he is the academic I think he is, I am a bit shocked by the immediate descent into insults. Shouldn’t we expect higher standards than this, or am I just being naive? Where is he by the way, looking for a map, or in a barroom brawl somewhere?

  2. Mulga Mumblebrain
    August 22nd, 2011 at 10:28 | #2

    Freelander, you old tart, you must remember that the Right, seeing that their Friedmanite/Reaganite dream-world of elite privilege, scrabbling for crumbs by the rabble and imperial brigandage abroad (a ‘New American Century’ that began crumbling after three years)is decomposing before their eyes, are going to get very, very, nasty. On one extreme you get the insults and bad potty-training induced misbehaviour of the congenitally morally misbegotten, and on the other are the Breiviks out there just itching to teach ‘the Left’ a lesson in ‘ Western Judeo-Christian values’. They’ll be leaping and ululating their joy today that after forty years they have finally obliterated Gaddafi, then, when Libya becomes a compliant stooge of the West, when the social welfare structure is demolished, when hunger, want and corruption grow, as they ALWAYS do in US stooge regimes, it will all be ignored. The hideous and vicious obscenity of ‘The Responsibility to Protect’ will become, ‘non-operative’ as the next victim is lined up. Of course it won’t go on much longer because the fractures in the global system of rule by homicidal psychopaths are opening up too rapidly and in way too many places to paper over the cracks, but if violence, murder and intimidation (which haven’t failed the West, yet)still have any power, they will be mobilised more often and wider afield than ever.

  3. John Quiggin
    August 22nd, 2011 at 10:41 | #3

    “after forty years they have finally obliterated Gaddafi, then, when Libya becomes a compliant stooge of the West,”

    That’s something of a misreading. Gaddafi was back inside the tent from about 2005, indeed a “compliant stooge” of the West, getting friendly visits from US leaders etc. The embrace of the “Arab Spring” was making a virtue of necessity, easier in this case because of Gaddafi’s past. Now that he’s gone, the focus may shift back to places like Yemen and Bahrain, where the US is finding it harder to abandon the local despots.

  4. John Quiggin
    August 22nd, 2011 at 11:01 | #4

    I should say that there are at least two economists named Steven Stern (and lots of non-economists), so please don’t jump to any conclusions.

  5. Michael Fisher
    August 22nd, 2011 at 11:32 | #5

    I recommend reading ‘The British Worker Question’ by Theo Nichols.

    This is an excellent critical account of how a small number of deeply flawed economic studies produced in the UK during the 1970s were used to frame the crisis of the British economy in terms of poor productivity growth – due in large part to lazy workers and militant unions. The policy solution? Obvious: de-unionise, deregulate, and so on.

    Nichols systematically picks apart the studies’ flawed logic, limited empirical supports and arbitrary political and economic assumptions.

    Nichols shows that the production and use of economic knowledge can have less to do with facts and reason – and more to do with the power that certain representations of economic ‘problems’ can provide to certain economic interests and actors to pursue their broader political objectives.

    After 30 years of de-unionisation and deregulation across the UK economy (and manufacturing industry in particular, where unions now exert almost no influence over the organisation and performance of work) UK productivity growth continues to lag most other leading economies.

    So maybe unions were not really the problem after all. But the policy arguement in the 1970s was never really about the stats. British ruling elites could not tolerate the growth of independent union militancy – which was first and foremost viewed as a political threat. The ‘productivity question’ provided cover for re-asserting political power over organised labour.

  6. TerjeP
    August 22nd, 2011 at 12:10 | #6

    Fran – I’m not averse to having my grammar corrected so long as it is done politely as you have done.

  7. Free Palestine
    August 22nd, 2011 at 12:22 | #7

    Trckng IP ddrsss, chckng n th nms f pstrs. r y tryng t spprss fr spch? Snds lk Chn, nt strl. ftr ll th cmmnts r rspctfl. s frlndr rl nm. Hw bt trjp? h, gss y lk thr sntmnts.

  8. Freelander
    August 22nd, 2011 at 12:48 | #8

    @John Quiggin

    My apologies to Steve Stern then. Just sounded familiar.

  9. Freelander
    August 22nd, 2011 at 12:51 | #9

    I also found it difficult to believe that Steve Williamson had a groupie!

  10. may
    August 22nd, 2011 at 13:01 | #10

    kevin1,steve at tha pub?

    is there a roster list in the thunk tank for culturally assimilable monikers?

    ps

    where’s the pub stevo?

    somewhere between rockhampton amd mckay(sic or sick?crikey)?

    i don’t think you know what a bananabender is.

  11. may
    August 22nd, 2011 at 13:07 | #11

    @Free Palestine

    up the top of this column is the phrase “leave a comment”.

    the blog belongs to JQ.

    it’s his blog.

    commenters are guest–invited guests.

    if he feels like kicking you off,that’s his call.

    if you are kicked off and are peeved about it,start your own blog.

    commenters will flock to you upholding unsuppressed free speech.

    go for it——good luck.

  12. Freelander
    August 22nd, 2011 at 13:07 | #12

    Not sure I understand how looking at IP addresses constitutes an attack on freedom of speech, although, to some people, anything you don’t like nowadays is labelled thus. Seems like a sensible way of detecting astroturf. Certainly means spoofers need take more trouble with their spoofs.

  13. NickR
    August 22nd, 2011 at 13:10 | #13

    @Free Palestine

    This is bizarre, it is JQ’s blog and one would think that he has the right to manage his own property as he pleases. However I am pretty sure the only censorship that takes place on this blog is to do with aggressive language or (rarely) the posting of a politicized talking point that is objectively untrue.

    Further I am pretty sure terjep and JQ are very politically opposed. Go through some old posts and verify this for yourself.

    Lastly (not that this settles anything) you can verify JQ’s position as an economist relative to Williamson here

    http://ideas.repec.org/top/top.person.all.html

  14. may
    August 22nd, 2011 at 13:12 | #14

    ps

    i still haven’t forgotten that JQ deleted an extremely witty, profound and earthshaking bon mot of mine.

    the spoilsport.

    but though i fell into a deep and traumatised state of bewilderment, i heroically pulled myself together and got over it.

    it can be done—i’m not the first—you too can do it—hang in there

  15. Freelander
    August 22nd, 2011 at 13:18 | #15

    Free Palestine :
    @Freelander
    What kind of name is freelander? How do I know you’re not Quiggin agreeing with himself?

    I suppose that indicates, or measures, your level of discernment.

  16. Greg
    August 22nd, 2011 at 13:23 | #16

    What of Michael Mandel? Is he relevant here?

    http://economistsview.typepad.com/economistsview/2007/06/michael_mandel_.html

    “(quoting Businessweek):More broadly, it becomes clear that “gains from trade are being measured instead of productivity,” according to Robert C. Feenstra, an economist at the University of California at Davis… “This has been missed.” …”

    Of course that is the USA, not Australia.

  17. may
    August 22nd, 2011 at 13:26 | #17

    @Free Palestine

    oo ‘e bit!

    i’ll say no more.

  18. Free Palestine
    August 22nd, 2011 at 13:45 | #18

    I’ve deleted or disemvowelled multiple troll comments from an apparent sock puppet. Please no more replies either to “Free Palestine” or Steven Stern

  19. Mulga Mumblebrain
    August 22nd, 2011 at 15:09 | #19

    Dear Esteemed Mr Quiggin-I must dissent from your observation. The ‘Arab Spring’ is dead, throttled in its crib by the old alliance of the USA, Israel and Saudi Arabia and its vile Gulf State allies, the most vicious despotisms of them all. Egypt will shortly receive its new Mubarak, a general or colonel acceptable to the USA, which controls them all. A rigged and long delayed ‘election’, presented as a ‘triumph for moderation’ by the Western MSM, should suffice. Tunisia will be ensnared in new debt, ‘loans’ with the usual neo-liberal conditionalities from the ever-generous West. Yemen and Bahrain remain and will remain hideous pro-US despotisms. The regime change aggression in Libya has succeeded. Gaddafi was never ‘inside the tent’ and signed his death warrant by favouring China, planning to establish a ‘gold dinar’ for intra-Africa trade, financing an African Monetary Fund and Central Bank, and disobeying orders once too often. And Syria is being attacked by salafist jihadis funded by the Saudis. Their attitude, of extreme hatred of the Alawites, Shia and Christians was echoed by a leading Saudi theocrat who declared recently that one third of Syrians (the non-Sunni) would have to be exterminated so that two-thirds (the Sunni) could live. That the Western MSM, with typical mendacity and conscienceless service to evil, could declare this armed, external, aggression, as ‘peaceful demonstrators yearning for democracy’, without a single dissenting voice, has been typically despicable. When the dust settles the Arab world will be ruled by Western stooges even more wicked and servile than their predecessors, whereupon the Western MSM will return to its habitual racist abuse of Arabs as ‘unfit for democracy’.

  20. John Quiggin
    August 22nd, 2011 at 15:13 | #20

    On “Gaddafi was never ‘inside the tent’” I point you here:

    http://www.politicsdaily.com/2009/08/17/john-mccain-praises-libyan-leader-gaddafi/

    Google will find plenty more.

  21. Ikonoclast
    August 22nd, 2011 at 15:52 | #21

    The West is not all evil and the East is not all good. There are black hats and grey hats all over the world. There are no white hats at all.

    If the more powerful appear and act more evil than the less powerful it is because they can. Those who do the most evil, do it because they have the most intrumental power. This is on average.

    The “Arab Spring” is a confused phenomenon. Many power groups, a number of them with fundamental and totalitarian mindsets of their own, are vying for power. The basic cause of the unrest, beneath all the political and sectarian superstructure, is the material condition of the people. This is worsening as the world enters another food and energy price and availability crisis.

  22. Mulga Mumblebrain
    August 22nd, 2011 at 17:30 | #22

    If you wish to understand just where the world is heading, and just how far down the sewer John Howard’s ABC has sunk, just check out today’s ‘Counterpoint’. In my opinion it represents, courtesy of ‘The Centre for Pre-Determined Research’ which so much controls ABC content these days, and four of the most extreme hatemongers one could possibly imagine (three already stars of The Fundament’s Augean stable) yet another low. A ‘debate’ without opposing opinions, just like ‘The Fundament’s’ daily sullage. And Phillip Ruddock sounding like a relatively decent voice.!!?? One feature of the general system collapse will be (and I think we can see it already) ever more frantic and frenetic Rightwing hatemongering, partly to divert attention from those criminals responsible for the coming collapse, but also out of innate Rightwing rage at seeing their ideal world of greed and pitiless cruelty dissolving into the muck from which it was fashioned.

  23. Mulga Mumblebrain
    August 22nd, 2011 at 17:35 | #23

    Dear Mr Quiggin, McCain’s opinions mean nothing. Once Libya showed that it would not follow orders, it was bets off, despite Gaddafi’s years of co-operation. In other words a typical Yankee double-cross. Gaddafi was hated by the West for his support of the ANC against apartheid, for his support for the Palestinians and for his attempts to promote African independence from the West. The CIA stooges who will replace him will follow none of these policies. Another triumph for the ‘Real Evil Empire’.

  24. Freelander
    August 22nd, 2011 at 17:54 | #24

    @Ikonoclast

    Quite right. Unfortunately, if you dare say anything that offends the ‘good guys’ versus ‘bad guys’ mythology many become irate. As one recent exponent of this way of looking at the world repeated “You’re either with US or you’re with the Terrorists.”

    Even really bad guys often have redeeming features (though far from fully redeeming). And even those we admire most, if seen through untinted lens, are noticeably far from perfect.

  25. August 22nd, 2011 at 18:06 | #25

    Prof. Q,

    Very timely and informative post, congratulations.

    I’ve just finished re-reading your 2001 paper “The Australian Productivity ‘Miracle’: A Sceptical View”.

    A comment I’ve heard in relation to productivity, is that the terms of trade may have lulled business into a sort of complacency, in that they find it less expensive to hire labour than investing in fixed capital.

    In that sense, you may be interested in having a look at Phillip Lowes’s 09-03-2011 speech “Changing Relative Prices and the Structure of the Australian Economy”. That presentation contained a chart (Graph 5) showing Real Consumption Wages and Real Production Wages (defined as compensation of employees per hour worked, divided by the household final consumption deflator and GDP deflator, respectively).

    I would like to ask your opinion: on that data and that presented by Jeff Borland at the RBA conference (Figure 8) would be it justified to say that the IR reforms had had the effect of keeping a lid on wages, especially for low paid workers?

  26. August 22nd, 2011 at 18:09 | #26

    @Magpie
    For some reason, instead of appearing “Figure 8″, a smiley face popped up. Anyway, it’s meant to say “Figure 8″!

    But now, this one is indeed meant to be a smiley face: :-)

  27. kevin1
    August 22nd, 2011 at 19:21 | #27

    Back on productivity, I just happened across a 2005 survey of 7818 managers in 16 sectors by the recruitment firm Hudsons (Australia) about employee “burnout” where 32% of managers reported an increase in burnout amongst employees and telecommunications was the worst with 44% of managers reporting this (thanks Sol). Of the overall 32% figure, about 1/3 each reported people leaving their organisation for a career change, or lower productivity, or increased sick days. http://au.hudson.com/documents/emp_au_HudsonReport_Q1_2005_AUS_Part3.pdf

    Work intensification broadly may have declined as JQ says, though I wonder about the measurement issue in today’s labour markets, or amongst managers or in certain sectors; still sounds like a real issue. Even with a tighter labour market, the effect of middle age, econ uncertainty, the golden handcuffs of super schemes would prevent job-hopping by many people, and the problem is unmeasured if repressed in the workplace. One HR expert http://www.hcamag.com/resources/hr-strategy/maximising-employee-performance-while-minimising-employee-stress/111090/ suggests the following to bosses who want to keep their talent on the books and performing well:

    Give employees as much control over their jobs as possible.
    Communicate clearly and often about everything important.
    Talk with your employees about what makes your company great, how you bring value to your customers and how your employees make that possible.
    Make sure supervisors know how to bring out the best in people.
    Encourage employees to talk freely and support one another.
    Help employees design their jobs to be as rewarding as possible.
    Improve your hiring and orientation process.
    Make sure employees have the resources and training to do their jobs well.

    In the official productivity discourse, are such good practices promoted actively by govt, including in their own jurisdiction? Or is that not part of the program?

  28. August 22nd, 2011 at 20:34 | #28

    I have a figure of about 330,000 student visa holders for the middle of this year.

  29. August 22nd, 2011 at 22:27 | #29

    And that might have been relevant if there hadn’t been a whole extra page of comments that I missed.

  30. Chris Warren
    August 22nd, 2011 at 22:46 | #30

    @Ronald Brak

    330,000 visa holders seems about right. There will be some visa grants in the remaining months, but it looks like the total will not exceed 400,000.

    Some visa grants can be onshore visa grants by current international students which can lead to double counting. There are other issues with visa data but depending on the source these can be controlled. Using visa data was an old technique, useful before 2002. Today AEI data is better.

  31. kevin1
    August 22nd, 2011 at 23:06 | #31

    @Chris Warren
    The HREOC paper I mentioned at #50 talks about ABS methodology changing over the period also, but are you just trying to establish the numbers or are you making some other point here? Same question to Ronald Brak.

  32. Chris Warren
    August 22nd, 2011 at 23:57 | #32

    @kevin1

    Due to Quiggin’s crazy software – I missed your comment at #50. This was due to Quiggin’s setting that posts with links go into moderation, so I had a different count than others. Moderated comments still add to counts.

    So I was working on a different page, until Quiggin released the hung comment, and then everyone caught up as they had two identical posts boosting the count.

    Anyway the HREC paper (Jakubowicz, Monami) does not provide any basis for using 650,000. Many holders of a vast range of temporary entry permits would have dependents, eg diplomats, professional vistors etc…..

    If you want a big number, there are always techniques one can use to construct it.

    The usage of 600-650,000 etc needs some explanation.

  33. kika
    August 23rd, 2011 at 12:36 | #33

    Gaddafi has not yet been captured, and it seems that his eldest son, Muhammad, has escaped from the custody of opposition fighters with the help of Gaddafi loyalists.

    “Opposition fighters have not managed to find Gaddafi yet and his exact whereabouts are still unknown. There are unconfirmed reports that he has fled from the country, but other reports say he left the capital after opposition fighters seized control of almost all of the city and is hiding in a bunker outside Tripoli. There are also reports claiming that Gaddafi has been seen at a hospital near Tajura, which is a suburb of Tripoli.

    A diplomatic source said Gaddafi may still be in his Bab al-Aziziyah compound in southern Tripoli, adding that Gaddafi has many bunkers there where he could hide from the revolutionary fighters.”

    http://www.presstv.ir/detail/195259.html

  34. kevin1
    August 23rd, 2011 at 16:37 | #34

    @Chris Warren
    “If you want a big number, there are always techniques one can use to construct it.

    The usage of 600-650,000 etc needs some explanation.”

    Chris you’re jumping at shadows. I’ve already conceded the point, there’s no agenda here! As you show, the discrepancy between enrolments and students is large enough to make it an important one. What’s surprising is that not just the “export boosters” but experts like Simon Marginson, Geoff Maslen, and the HREC authors also make this mistake (you can Google “600,000 international students” Australia to check this). In the context of the immigration debate, the real numbers are not much more than half the popular understanding, and people need to be set straight. Maybe you should find a way to get this more widely understood.

    The reason I brought this up originally was because Treasury wants a big focus on microeconomic reform and productivity enhancement in education. With your education focus , I would like to know what you think about that.

  35. Chris Warren
    August 23rd, 2011 at 19:21 | #35

    @kevin1

    The 600,000 appears to be an AUSTRADE innovation for their crass commercial purposes.

    Universities Australia has a Deloitte Access Economics commissioned report with correct usage of 600,000.

    Of course Treasury wants microeconomic reform and productivity enhancement. This is a standard winge going right back to the Vernon Committee (1965).

    When capitalism has choked-up it always tries to expand exports and complains about too many workers. This is coded as factors affecting “productivity”. [see Vernon v1, p 94f].

    Any economist prattling about productivity without defining it – is engaging in astrology. Vernon defined it as GNP/worker – Roy Green says “output per employee in a given time period” but then says the problem is how to measure inputs and outputs in common units. Although Green does note that classical economics have “an alternative approach” ie Ricardo and Marx [EPAC Background Paper 5 (December 1990)].

    If you accept the present concept of productivity then logically you will support lower wages, greater intensity, more exports, bigger profits for banks and BHP, and more debt. The trick is to step out of this modernist framework.

    So I am more concerned about deconstructing all this noise about productivity in general, not its specific application to a particular industry. Society as a whole does not benefit if capitalists increase productivity – public services disappear or become crowded, wages fall in the long-run and unemployment ratchets up eventually.

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