How can you do your part to increase Australia’s productivity? Get to work Australia!
We have not read the productivity commission’s report on how to increase output per hour here in Australia. But we are deeply, almost irrationally suspicious of it in the first place, not because it’s automatically wrong, mind you, but because it reminds us so much of being harangued by Alan Greenspan for the last ten years.
Greenspan preached the gospel of productivity growth during his time as the irresponsible, rate-slashing, currency-debasing chief of American monetary policy. Writing in 2002, the Former Fed head said, “Arguably, the pickup in productivity growth since 1995 largely reflects the ongoing incorporation of innovations in computing and communications technologies into the capital stock and business practices. Indeed, the transition to the higher permanent level of productivity associated with these innovations is likely not yet completed.”
Productivity is obviously key to corporate profit growth because it is one sure way of increasing revenues without increasing expenses, whether on labour or capital. If you can get more output per hour out of each employee, you need fewer employees. Output goes up, employment costs remain fixed or even decline, adjusted for inflation.
Here’s the thing though, we’ve never seen a computer work a coal pit. Nor have we ever seen a keyboard put a hard day’s work digging up iron ore. What about you? Seen any microprocessors loitering at Olympic Dam? Any mobile phones moonlighting at Zinifex’s zinc smelter in Hobart? No? Hmm.
Of course computers improve productivity in all sorts of industries, mining included. But the net affect on the economy, at least for wages, is rather deflationary. Wages go up for people who clack away at keyboards all day. But those wage gains are not widely distributed throughout the economy. Adopting labour-saving technology (or exporting labor intensive jobs to other countries) is not a clear-cut winner for the entire work-force of a nation.
For that reason, we say be wary of the productivity crowd. It is hard to increase your income when you are losing whole industries to international competition. While it is certain that productivity is a boon to people in jobs like the one your editor enjoys, it is less certain that the economic benefits of productivity accrue to the wider work force.
And by the way, there isn’t a real mystery about how American firms improved productivity. They fired the people who were in jobs that could be done cheaper in Mexico or overseas and they made everybody else work harder for about the same amount of money. Presto! Increased productivity, corporate profits on the one hand, flat wages growth on the other. Eventually this forces consumers to go deeper into debt, maintaining their lifestyle with credit, in the absence of real wage growth. But debt is a whole other story…
We love many things about our homeland, especially Dr. Pepper, Mt. Dew, and Captain Crunch. But don’t be so eager to embrace everything about it Australia. You may be surprised at what you get.
Meanwhile, here are some practical tips on what you can do to personally improve your productivity: Spend less time in traffic. Leave for work earlier and stay later (without getting paid for your extra effort.) Eat at your desk for lunch (if you must take time to eat.) Take typing lessons. Nothing increases output per hour more than a world-class touch typist. And if you must (though we don’t’ recommend it) do two jobs, but get paid for one.
The Daily Reckoning Australia