Labour and Productivity

Two economic resilience indicators regularly monitored by Statistics New Zeland are (i) Assets and Infrastructure and (ii) Labour and Productivity

Stats NZ 2017
Since 1987, labour productivity has increased an average of 2.2 percent a year
  • Between 1987 and 2013, average annual growth in labour productivity was 2.2 percent. This was primarily the result of output (as measured by real gross domestic product (GDP)) growing 2.1 percent a year.
  • In 2013, labour productivity increased 2.0 percent, output increased 2.4 percent, and labour input (measured as hours paid) increased 0.3 percent.
  • Labour productivity relates to the measured sector of the economy, divided into three broad groups: primary, goods-producing, and services.
Definition and measure
  • Labour productivity is a measure of the efficiency of the labour force, that is, output per hour paid. Growth in labour productivity implies an increase in the efficiency and competitiveness of the economy.
  • The labour productivity measure covered approximately 58 percent of the entire economy in 2011. The industries covered are defined as the ‘former measured sector’ and consist of industries for which estimates of inputs and outputs are independently derived in constant prices.
  • Labour productivity is the ratio of output (as measured by real GDP) to labour input (measured as hours paid) for the \’former measured sector\’.
  • Excluded are those industries for which real value-added in the New Zealand System of National Accounts is largely measured using input methods, such as the number of employees. This is mainly government non-market industries that provide services – such as administration and defence – free or at nominal charges.

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Will increased productivity increase living standards?

Paul Krugman an American Nobel Prize economist stated:

“Productivity isn’t everything but in the long run its almost everything. “

There has always be a strong and positive connection between rising productivity and living standards.  However since the global financial crisis (GFC) 2008 a number of economists have identified a significant change – the uncoupling of higher productivity and higher living standards  being experienced by a small proportion of people.

Barack Obama speaks on the increasing inequality in the US

4 December 2013And the result is an economy that’s become profoundly unequal, and families that are more insecure.  I’ll just give you a few statistics.  Since 1979, when I graduated from high school, our productivity is up by more than 90 percent, but the income of the typical family has increased by less than eight percent.  Since 1979, our economy has more than doubled in size, but most of that growth has flowed to a fortunate few.

The top 10 percent no longer takes in one-third of our income — it now takes half.  Whereas in the past, the average CEO made about 20 to 30 times the income of the average worker, today’s CEO now makes 273 times more.  And meanwhile, a family in the top 1 percent has a net worth 288 times higher than the typical family, which is a record for this country.
So the basic bargain at the heart of our economy has frayed.  In fact, this trend towards growing inequality is not unique to America’s market economy.  Across the developed world, inequality has increased.  Some of you may have seen just last week, the Pope himself spoke about this at eloquent length.  “How can it be,” he wrote, “that it is not a news item when an elderly homeless person dies of exposure, but it is news when the stock market loses two points?”