Australia’s productivity is back in the news, this time a survey ranking us second worst of 51 countries for productivity growth. But productivity means lots of things to different people and often the discussion is very confused, not least amongst business people.

On a recent visit to Australia the chief executive officer of Royal Dutch Shell, Peter Voser, expressed concern about productivity rates and the cost of labour, arguing for government intervention to make projects more economic. 

Mr Voser like many other people, whether deliberately or inadvertently, mix up productivity, labour shortages, costs, competitiveness and profits; productivity itself is taken to be something to do with the viability of gas investments in Australia. There are hints at a cheap labour agenda. And we have no idea how to define his ‘competitive productivity rates’.

Jennifer Westacott from the Business Council of Australia has referred to Australia as a declining productivity nation.  She referred in particular to work the BCA commissioned on the cost of certain benchmarked projects in Australia and the US with the Australian ones being 30 per cent more costly. Benchmarking when you can pick your own examples makes it easy to show almost anything you like. But costs are not productivity, and productivity has not declined though its growth may well have slowed.

Ms Westacott could have gone to any one of the many data sources and found that Australia’s productivity in terms of GDP per employee (in $US) was US$130,000 compared with the US at US$108,000 in 2011. So Australia’s productivity is 21 per cent higher on this fundamental measure. Put another way, Australia’s productivity is higher than the country which has an industrial relations system our business groups aspire to.

Instead of examining the actual productivity figures reports such as that commissioned by the Australian Human Resources Institute trawl all sorts of databases to find the measures they think are unfavourable to Australia. And their discussion of the Fair Work Act identifies all the measures that might prevent companies reducing their workers’ pay.  Those are then mixed in with the productivity debate.

Businesses may well say high wages reduce their profit and they need government help to lower them. To confuse that with raising productivity is to corrupt the productivity debate. For business, productivity camouflages an argument that is much harder for them to discuss; the argument that business wants more profit at the expense of wage earners.

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