No hard and fast rule for workers

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.

85 thoughts on “No hard and fast rule for workers

  1. @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: 🙂

  2. 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?

  3. @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.

  4. @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.

  5. @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.

  6. 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

  7. @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.

  8. @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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