tag:theconversation.com,2011:/us/topics/labour-productivity-11385/articlesLabour productivity – The Conversation2023-09-06T06:15:02Ztag:theconversation.com,2011:article/2126422023-09-06T06:15:02Z2023-09-06T06:15:02ZPer capita recession as Chalmers says GDP ‘steady in the face of pressure’<p>Australia’s economy grew a mere <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2023">0.4%</a> in the June quarter according to figures released by the Bureau of Statistics on Wednesday, a performance Treasurer Jim Chalmers describes as “steady in the face of unrelenting pressure”.</p>
<p>The lacklustre growth follows growth of 0.4% the previous quarter, and is a step down from the growth of 0.7% in the quarters that preceded it, presenting a stark reminder of the economic challenges caused by rising interest rates as the Reserve Bank attempts to reign in inflation.</p>
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<p>If growth continued at that pace for another two quarters, the annual growth rate would barely reach 1.6%, an alarmingly low figure that. For many Australians it probably feels like a recession, because all of the growth was accounted for by population growth, meaning gross domestic product (GDP) per person fell by 0.3% in both March and the June quarters, in a so-called “<a href="https://www.amp.com.au/content/dam/amp-au/documents/insights/recession-risk-oi-16-2023v2.pdf">per capita recession</a>”.</p>
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<p>The driving force behind this tepid growth is primarily weak household consumption which grew by only 0.1% in the quarter – far less than Australia’s population. </p>
<p>Households, grappling with the increased cost of essential expenses such as fuel and rent, have resorted to cutting down on savings. </p>
<p>In the three months to June Australia’s household saving ratio plummeted to 3.2%, its lowest rate in 15 years.</p>
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<p>How is it possible to have both weak spending and weak saving at the same time? </p>
<p>The answer is that disposable (post tax) income fell by even more. </p>
<p>Real per capita disposable income fell by 2.1% in the June quarter. </p>
<p>Outside of pandemic lockdown years of 2020 and 2021, this was the biggest fall in disposable income per Australian since the 2009 global financial crisis.</p>
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<p>The Bureau of Statistics says mortgage interest expenses have almost doubled over the past year as home building (“dwelling investment”) has slid by 0.2% in the quarter and 1.1% over the year. </p>
<p>In better news, business investment has shown resilience, climbing 0.6% in the quarter, and 3.4% over the year driven, driven in part by a <a href="https://www.afr.com/policy/economy/investment-jumps-as-tradies-rush-on-ute-tax-break-20230831-p5e0z1">rush of tradies</a> attempting to upgrade their cars before a cut in the instant asset write-off limit came into effect on July 1.</p>
<p>Exports climbed 4.3% in the quarter, driven by “education exports” as international students returned.</p>
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Read more:
<a href="https://theconversation.com/you-dont-have-to-be-an-economist-to-know-australia-is-in-a-cost-of-living-crisis-what-are-the-signs-and-what-needs-to-change-210373">You don't have to be an economist to know Australia is in a cost of living crisis. What are the signs and what needs to change?</a>
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<p>Gross operating surpluses, a measure of company profits, fell by 8.6% in the quarter driven by a fall in commodity prices which drove down mining profits.</p>
<p>Pressing on profits were higher wage bills – which surged 9.9% outside of mining, reflecting both wage growth and employment growth, outstripping the 5.1% uptick in non-mining profits.</p>
<p>Lower commodity prices also drove another decline in Australia’s terms of trade which fell by 7.9%. The terms of trade measure the price of Australian’s exports relative to the price of imports, meaning that Australia is getting fewer imports for its exports – something that will inevitably feed into our standard of living.</p>
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<p>This subdued economic growth is the primary reason the Reserve Bank decided to hold interest rates <a href="https://www.rba.gov.au/media-releases/2023/mr-23-23.html">constant</a> at its board meeting yesterday. </p>
<p>The bank is expecting economic growth to decelerate to an annual rate of only <a href="https://www.rba.gov.au/publications/smp/2023/aug/pdf/forecast-table-2023-08.pdf">0.9%</a> by the end of the year, in large measure because of the series of 12 interest rate rises it has imposed since May last year.</p>
<p>One of the bank’s biggest concerns, and one of the government’s biggest concerns, is labour productivity (GDP per hour worked) which slid a further 2% in the quarter to be down <a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/jun-2023">3.6%</a> over the year. </p>
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<p>The bank’s outgoing governor Philip Lowe says falling or weak productivity growth makes wage increases more likely to feed inflation, limiting his freedom to cut interest rates, a point he might address in his final speech as governor on Thursday, to be entitled <a href="https://rba.livecrowdevents.tv/SpeechbyPhilipLoweGovernorAnikaFoundation7sept">Some Closing Remarks</a>.</p>
<p>Boosting productivity – how much we produce for each hour we work – is important. Our standard of living and the pain we need to inflict to fight inflation will depend on it.</p><img src="https://counter.theconversation.com/content/212642/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Isaac Gross does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Six charts explain the Australian economy. Three of the most disturbing show living standards going backwards, productivity collapsing and household saving falling to a 15-year low.Isaac Gross, Lecturer in Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1887162022-08-25T20:03:08Z2022-08-25T20:03:08ZIf productivity was the magical fix some claim, we wouldn’t need a jobs summit<figure><img src="https://images.theconversation.com/files/480533/original/file-20220823-18-nkq72x.jpg?ixlib=rb-1.1.0&rect=0%2C0%2C4139%2C2080&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><span class="source">Shutterstock</span></span></figcaption></figure><p><em>This article is part of The Conversation’s series looking at Labor’s jobs summit. Read the other articles in the series <a href="https://theconversation.com/au/topics/jobssummit2022-125921">here</a>.</em></p>
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<p>The Treasury <a href="https://treasury.gov.au/sites/default/files/2022-08/2022-302672-ip_0.pdf">issues paper</a> published in the lead-up to the Albanese government’s Jobs and Skills Summit runs to 11 pages of text. It mentions productivity 21 times.</p>
<p>It’s a safe bet that increasing productivity – put simply, looking at how Australia’s workers can produce more from the same inputs – will be a dominant theme in the summit’s crowded agenda.</p>
<p>That’s certainly the emphasis <a href="https://www.australianchamber.com.au/news/acci-chief-executive-andrew-mckellar-address-to-the-national-press-club-of-australia/">business groups want</a>. Their pre-summit messaging has stressed that productivity is the secret to prosperity and higher wages. </p>
<p>It’s an equally safe bet the summit will hear a familiar list of business-friendly measures – deregulation, lower business taxes, liberalised immigration – as the means to that end. </p>
<p>Productivity growth is important. It is a vital dimension of economic success. It creates the possibility for higher living standards. But it doesn’t automatically deliver them. </p>
<p>Yes, we want work to be as productive as possible, but always within the bounds of safety, quality and fairness. </p>
<p>An uncritical obsession with productivity threatens to distract us from the deeper problems Australia must solve to make economic and social progress in the 21st century.</p>
<h2>The wrong idea about productivity</h2>
<p>Productivity has gained a bit of a bad name after decades of technocratic <a href="https://www.pc.gov.au/inquiries/current/productivity/interim1-key-to-prosperity">inquiries</a> and pompous <a href="https://news.yahoo.com/one-third-of-aussie-workers-unproductive-and-lazy.html">browbeating</a> about how workers are unfocused or even lazy. </p>
<p>It is commonly misunderstood as anything that cuts costs, tightens belts or speeds up work. Some employers laughably describe wage cuts as a “productivity initiative” – turning economic theory on its head.</p>
<p>Properly measured, productivity means getting more out of what we put into the economy – first and foremost among these inputs is our labour. </p>
<p>It means valuing work and investing in workers, not cheapening and intensifying labour. It entails quality as much as quantity. Doubling pupil-student ratios in schools, or loading up nurses with extra patients, hardly improves genuine productivity. </p>
<p>In the decade prior to the COVID-19 pandemic, Australia’s productivity performance was certainly poor by historical standards. Labour productivity grew at an average annual rate of less than 1% – the slowest in the postwar era.</p>
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<p>Australia’s productivity growth has been poor relative to other industrialised economies too, being <a href="https://www.oecd-ilibrary.org/economics/data/oecd-economic-outlook-statistics-and-projections_eo-data-en">below the OECD average</a> over the past two decades.</p>
<p>But this poor performance needs to be kept in perspective. </p>
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Read more:
<a href="https://theconversation.com/why-productivity-growth-stalled-in-2005-and-isnt-about-to-improve-159706">Why productivity growth stalled in 2005 (and isn't about to improve)</a>
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<h2>Productivity has never been higher</h2>
<p>First, productivity growth, even if slower than in the past, has still been positive. Hence the level of productivity demonstrated by the average Australian has never been higher. </p>
<p>In the three months to March (<a href="https://www.abs.gov.au/statistics/economy/national-accounts/australian-national-accounts-national-income-expenditure-and-product/latest-release">the most recent data available</a>), an average hour of expended labour produced A$110 worth of gross domestic product (GDP). Even after adjusting for inflation, that’s a 13% gain in the past decade. (Workers, on average, receive less than half of that in compensation.) </p>
<p>The productivity slowdown of the 2010s reflected a complex set of causes. Likely culprits include the growth of insecure, relatively unproductive service jobs; very weak business investment in capital and innovation; and falling productivity in resource extraction (due to the exhaustion of more economical reserves). </p>
<p>Nevertheless, productivity growth remained positive.</p>
<h2>There are signs of improvement</h2>
<p>Second, there are encouraging signs productivity has picked up since the pandemic.</p>
<p>Huge swings in employment and output during the lockdowns complicate productivity measures, but despite these ups and downs, labour productivity was 6% higher in March 2022 than before COVID. That’s an annualised growth rate of 2.6%, rivalling the most exuberant years of the postwar boom.</p>
<p>A post-COVID improvement in productivity is visible in <a href="https://www.nber.org/papers/w30267">other countries</a> too. </p>
<p>There is no consensus yet on its causes, or whether it will be sustained. Possible explanations include productivity benefits of working from home, and the fact that tight labour markets force employers to try harder to get more value from each worker (as it’s no longer easy to hire new staff).</p>
<h2>Yet wages continue to lag</h2>
<p>These two points demonstrate that productivity is no magic bullet for the other challenges facing Australia’s labour market. </p>
<p>Nor is it credible to blame lack of productivity for another big issue on the summit agenda: the historically weak growth in wages over the past decade.</p>
<p>Business leaders like to insist wage increases aren’t possible without productivity growth. But the actual problem for the past decade has been the opposite: productivity grew while real wages stagnated – and are now <a href="https://australiainstitute.org.au/post/real-wages-plunge-to-2012-levels/">falling rapidly</a> due to the surge in inflation.</p>
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Read more:
<a href="https://theconversation.com/real-wages-are-shrinking-these-figures-put-it-beyond-doubt-183343">Real wages are shrinking, these figures put it beyond doubt</a>
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<p>Consequently, the gap between productivity and real wages has widened dramatically.</p>
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<p>In fact, the relationship between the two (which many economists assume to be automatic) has been broken for much longer.</p>
<p>Since the mid-1970s, economic and labour market policy in Australia deliberately <a href="https://johnmenadue.com/low-wages-deliberate-design-feature/">undermined wage growth</a> through measures such as weakening collective bargaining, downgrading the award system to a safety net, vilifying and policing unions, and (for many public sector workers) simply <a href="https://www.unionsnsw.org.au/wp-content/uploads/2022/06/WAGE-NORMS-AND-THE-LINK-TO-PUBLIC-SECTOR-SALARY-CAPS_final.pdf">dictating minimal wage gains</a>. </p>
<p>Not surprisingly, all this kept wage growth well behind productivity. As a result, the <a href="https://www.futurework.org.au/exploring_the_decline_in_the_labour_share_of_gdp">share of labour compensation in GDP</a> has fallen by 13 percentage points since the mid-1970s, reaching an all-time low of 45% this year. </p>
<p>The share of corporate profits in GDP, not coincidentally, increased by a similar margin, and is now at record highs.</p>
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Read more:
<a href="https://theconversation.com/profits-push-up-prices-too-so-why-is-the-rba-governor-only-talking-about-wages-185688">Profits push up prices too, so why is the RBA governor only talking about wages?</a>
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<p>These tectonic shifts in national income distribution refute the common assumption that workers are automatically paid according to their productivity. </p>
<p>Workers can be rightly sceptical that a generic commitment to revitalising productivity growth will automatically solve the problems they face – falling real wages, endemic insecurity and the erosion of collective representation.</p>
<p>To build a genuine consensus on productivity, therefore, the jobs summit must also advance a convincing vision for how the gains from productivity growth will be more fairly shared.</p><img src="https://counter.theconversation.com/content/188716/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jim Stanford is a member of the Australian Services Union.</span></em></p>An uncritical obsession with productivity threatens to distract us from the deeper problems Australia must face and fix.Jim Stanford, Economist and Director, Centre for Future Work, Australia Institute; Honorary Professor of Political Economy, University of SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1283012019-12-05T18:33:38Z2019-12-05T18:33:38ZVital Signs: Australia’s slipping student scores will lead to greater income inequality<figure><img src="https://images.theconversation.com/files/305291/original/file-20191205-70174-1kjpymn.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">While no test is perfect but the Programme for International Student Assessment rankings are pretty useful for understanding the skills young people are being equipped with.</span> <span class="attribution"><span class="source">www.shutterstock.com</span></span></figcaption></figure><p>The latest Programme for International Student Assessment (PISA) <a href="https://www.oecd.org/pisa/publications/PISA2018_CN_AUS.pdf">results</a> are bad news for Australian students, parents, employers and policymakers. Pretty much everyone.</p>
<p>Australian 15-year-olds are now below the OECD average in mathematics, and our results in reading and science have fallen badly.</p>
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<a href="https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=266&fit=crop&dpr=1 600w, https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=266&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=266&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=334&fit=crop&dpr=1 754w, https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=334&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/305284/original/file-20191204-70101-ocuq0h.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=334&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
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<span class="caption">Trends in performance in reading, mathematics and science: The blue line indicates the average mean performance across OECD countries with valid data in all PISA assessments. The red dotted line indicates mean performance in Australia. The black line represents a trend line for Australia. * indicates mean-performance estimates that are statistically significantly above or below PISA 2018 estimates for Australia.</span>
<span class="attribution"><a class="source" href="https://www.oecd.org/pisa/publications/PISA2018_CN_AUS.pdf">OECD, PISA 2018 Database</a></span>
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<p>Reading has gone backwards by three-quarters of a school year since 2000, mathematics by more than one school year since 2003, and science by a school year since 2006.</p>
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Read more:
<a href="https://theconversation.com/aussie-students-are-a-year-behind-students-10-years-ago-in-science-maths-and-reading-127013">Aussie students are a year behind students 10 years ago in science, maths and reading</a>
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<p>The results have generated a firestorm of press coverage, and it’s true they are certainly alarming. </p>
<p>They underscore the need for a serious discussion about education reform in this country.</p>
<p>They also help explain our poor productivity growth in recent years, and are full of gloomy news for future employment prospects and income inequality.</p>
<h2>Skills and productivity</h2>
<p>While no test is perfect, PISA is pretty useful for understanding the skills young people are equipped with as they enter the workforce or embark on post-secondary education.</p>
<p>This is because, as <a href="https://www.acer.org/au/">Australian Council for Educational Research</a> chief Geoff Masters <a href="https://www.theage.com.au/education/focus-on-basics-leaves-schoolkids-short-in-essential-deep-thinking-20191203-p53gd6.html">has pointed out</a>:</p>
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<p>Unlike many tests and examinations, PISA does not assess students’ abilities to recall facts or basic literacy and numeracy skills. Instead, it assesses the ability to transfer and apply learning to new situations and unseen problems. This requires an understanding of fundamental concepts and principles, as well as the ability to think.</p>
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<p>This week the Australian Bureau of Statistics <a href="https://www.abs.gov.au/AUSSTATS/abs@.nsf/Lookup/5260.0.55.002Main+Features12018-19?OpenDocument">published figures</a> revealing a 0.2% fall in labour productivity for 2019, with a shocking 0.8% fall adjusting for the quality of work performed.</p>
<p>Many factors contribute to labour productivity, but what economist call “human capital” (essentially “skills”) are a key part. With the skills of Australia’s workforce and future workforce falling, is it any wonder that productivity is lagging?</p>
<p>That’s a big problem for wages growth. In the long run, one basically expects real living standards for workers to track productivity. There can be deviations for certain time periods, but as Nobel laureaute Paul Krugman <a href="https://mitpress.mit.edu/books/age-diminished-expectations-third-edition">famously put it in 1990</a>:</p>
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<p>Productivity isn’t everything, but in the long run it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.</p>
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<h2>Widening the gap</h2>
<p>The PISA results also tell us we have also dropped relative to other countries. In a world where routine tasks are increasingly being automated and there is fairly strong international mobility of labour, that’s doubly concerning. </p>
<p>Our ability to compete in a globalised world of competitive international trade depends not only only our absolute level of skills but our relative level of skills. </p>
<p>Take mathematics. Our PISA scores are now comparable to those of Portugal, and behind Latvia and the Czech Republic. Estonia – with a <a href="https://tradingeconomics.com/estonia/gdp-per-capita">GDP per capita that’s half ours</a> – is miles ahead of us. We’re even getting beaten by New Zealand.</p>
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<p>A final piece of depressing news is that we have fewer top performers and many more poor performers. In NSW, for instance, our number of poor performers has doubled since 2003 <a href="https://www.smh.com.au/education/pisa-tests-put-fewer-nsw-students-among-the-world-s-brightest-20191204-p53gxa.html">(from 10% to 20%)</a>. Our number of top performers has roughly halved over the same period.</p>
<p>As University of Chicago economics professor <a href="https://www.theatlantic.com/science/archive/2019/02/green-new-deal-economic-principles/582943/">Michael Greenstone has emphasised</a>, the fundamental fact of labour economics is that people get paid for their skills.</p>
<p>If the spread of skills between the best and worst students in Australia is getting wider, then we should expect income inequality to worsen. The tax and transfer system in Australia does a lot to mitigate that inequality, but there are limits.</p>
<h2>What to do?</h2>
<p>So how to improve Australia’s education system?</p>
<p>As <a href="http://research.economics.unsw.edu.au/richardholden/assets/the-australian%2c-friday%2c-june-17%2c-2016%2c-pages-from-12-to-12.pdf">I have pointed out previously</a>, the international evidence on “what works” in education involves some things that cost real money and others that are basically free.</p>
<p><a href="https://pubs.aeaweb.org/doi/pdfplus/10.1257/app.5.4.28">An excellent 2013 paper</a> by economists Will Dobbie and Roland Fryer used data from New York City charter schools to calculate that five policies explained about 45% of the variation in school effectiveness. Those policies were:</p>
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<p>frequent teacher feedback, the use of data to guide instruction, high-dosage tutoring, increased instructional time and high expectations.</p>
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<p>Of course, people can argue about the “external validity” of causal effects in specific geographies or educational contexts. That’s why we need good evidence from randomised controlled trials in education in Australia.</p>
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Read more:
<a href="https://theconversation.com/the-top-ranking-education-systems-in-the-world-arent-there-by-accident-heres-how-australia-can-climb-up-128225">The top ranking education systems in the world aren't there by accident. Here's how Australia can climb up</a>
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<p>But make no mistake: the cost of failing to improve the skills of our children and future workforce is huge.</p>
<p>It has dramatic implications for productivity, living standards and income inequality.</p>
<p>And it’s too important for ideological commitments on the left or the right to prevent real reform. The only thing that matters is “what works”.</p><img src="https://counter.theconversation.com/content/128301/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Richard Holden does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The skills children learn at school have dramatic implications for their own future and the nation’s productivity, living standards and income inequality.Richard Holden, Professor of Economics, UNSW SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1249022019-10-24T18:59:34Z2019-10-24T18:59:34ZWhat if we measured the thing that matters most: “carbon productivity”<figure><img src="https://images.theconversation.com/files/298495/original/file-20191024-170475-1uktk1r.jpg?ixlib=rb-1.1.0&rect=520%2C395%2C2868%2C1766&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Carbon productivity is the measure that matters, but we are hung up on the productivity of our workers.</span> <span class="attribution"><a class="source" href="https://www.pexels.com/photo/gray-scale-photo-of-gears-159298/">pixabay/pexels</a></span></figcaption></figure><p>Ask any economist a question, and you will usually get the answer: “productivity”.</p>
<p>The winner of the 2008 Nobel Prize in Economics, Paul Krugman, set the standard in <a href="https://tinyurl.com/y5wdqma9">1994</a>:</p>
<blockquote>
<p>Productivity isn’t everything, but, in the long run, it is almost everything. A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.</p>
</blockquote>
<p>The new head of Australia’s treasury, Steven Kennedy, said much the same thing <a href="https://theconversation.com/if-you-want-to-boost-the-economy-big-infrastructure-projects-wont-cut-it-new-treasury-boss-125705">this week</a>:</p>
<blockquote>
<p>The most important long-term contribution to wage growth is labour productivity.</p>
</blockquote>
<p>For my money, they could say the same about “carbon productivity”, a idea that is going to matter to us more.</p>
<p>Labour productivity is notoriously <a href="https://www.theage.com.au/business/the-economy/productivity-its-not-whats-put-in-its-whats-left-out-20130621-2oo27.html">hard to measure</a>; measuring changes in it is harder still. </p>
<p>It’s relatively easy to measure in the jobs we are doing less of these days, such as making washing machines; harder to measure in the jobs we are doing more of, such as caring for people.</p>
<p>And it’s less important than you might think. People aren’t a particularly finite resource. Allowable carbon emissions are.</p>
<h2>Carbon is the input that matters</h2>
<figure class="align-right zoomable">
<a href="https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=237&fit=clip" srcset="https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=840&fit=crop&dpr=1 600w, https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=840&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=840&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1055&fit=crop&dpr=1 754w, https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1055&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/298501/original/file-20191024-170471-mygoz.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1055&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Economist Paul Krugman. ‘In the long run productivity is almost everything.’</span>
<span class="attribution"><span class="source">CHRISTOPHER BARTH/EPA</span></span>
</figcaption>
</figure>
<p>The Intergovernmental Panel on Climate Change says net carbon emissions will have to be reduced to <a href="https://www.ipcc.ch/reports/">zero</a>.</p>
<p>That means we’ve a carbon budget, a limited amount of greenhouse gas we can emit from here on. It would make sense to use it wisely.</p>
<p>What I am proposing is a target for “carbon productivity”, the amount of production we achieve from each remaining unit of emissions – as a means of helping us cut overall carbon emissions.</p>
<p>It’s easy to calculate: gross domestic product divided by net emissions. We already measure GDP, and we already measure emissions <a href="http://pdf.wri.org/navigating_numbers_chapter5.pdf">in tonnes</a>, albeit unevenly. </p>
<p>We are going to need huge increases in carbon productivity, much more so as a result of cutting emissions than increasing production.</p>
<p>Things that are good for labour productivity might well be bad for carbon productivity. For example, replacing a sweeper with an air blower is good on the first count, bad on the second. </p>
<h2>Measuring carbon productivity…</h2>
<p>If introduced at a national level, a target, or at least a widely published measure, could start to focus government minds on what’s important and what’s not, and assist in allocating resources. Solar farms would become more likely to gain support than coal-fired power plants. </p>
<p>Regulatory resources might be redirected in surprising ways. While a small number of large emitters constitutes an easy target for policymakers, if those large emitters are efficient, the government might find it has to move its focus to the larger number of small inefficient emitters.</p>
<p>It could also help us think about how we resolve the conflict between the perceived need for economic growth and the need to substantially cut emissions. Both would be important, the measures that achieved both would be the most important.</p>
<p>Accounting debates about whether to carry <a href="https://theconversation.com/carry-over-credits-and-carbon-offsets-are-hot-topics-this-election-but-what-do-they-actually-mean-116748">carry forward international credits</a> would be rendered meaningless.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/we-can-be-a-carbon-neutral-nation-by-2050-if-we-just-get-on-with-it-111628">We can be a carbon-neutral nation by 2050, if we just get on with it</a>
</strong>
</em>
</p>
<hr>
<p>Giving national attention to measuring carbon productivity would put more pressure on more firms to measure all of their emissions. Many already measure their “scope 1” direct emissions. A smaller number measure “scope 2” emissions (from things such as electricity used by the firm). </p>
<p>A much smaller number measure “<a href="https://compareyourfootprint.com/difference-scope-1-2-3-emissions/">scope 3</a>” emissions (from sources they do not own, such as air travel, waste and water). They’re the <a href="https://www.cdp.net/en">hardest to measure</a>. </p>
<h2>…might just produce results</h2>
<p>For some, sustainable economic growth is a contradiction in terms. </p>
<p>They argue that economic growth is incompatible with ecological survival. </p>
<p>But the population appears to want <a href="https://www.sciencedirect.com/science/article/abs/pii/S0959378016300371">both</a>, and the political and social consequences of failing to achieve both could be <a href="http://press-files.anu.edu.au/downloads/press/n5694/pdf/ch09.pdf">devastating</a> for democratic society and the planet. It has already been established that rising unemployment <a href="https://oxfordre.com/climatescience/view/10.1093/acrefore/9780190228620.001.0001/acrefore-9780190228620-e-310">reduces support</a> for action on climate change.</p>
<hr>
<p>
<em>
<strong>
Read more:
<a href="https://theconversation.com/theres-evidence-that-climate-activism-could-be-swaying-public-opinion-in-the-us-123740">There's evidence that climate activism could be swaying public opinion in the US</a>
</strong>
</em>
</p>
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<p>Targeting or measuring carbon productivity by itself won’t achieve those goals.</p>
<p>For that, we would need some form of carbon pricing and a government committed to the uptake of low-emission technologies.</p>
<p>But if we are to have a shot at achieving both, we’ll need to know where we are going.</p><img src="https://counter.theconversation.com/content/124902/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Peetz receives funding from the Australian Research Council and, as a university employee, has undertaken research over many years with occasional financial support from governments in Australia and overseas from both sides of politics, the OECD, the ILO, employers and unions.</span></em></p>Labor productivity doesn’t matter as much as emissions productivity. Workers aren’t a particularly finite resource.David Peetz, Professor of Employment Relations, Centre for Work, Organisation and Wellbeing, Griffith UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1234762019-09-17T13:28:21Z2019-09-17T13:28:21ZNew technology isn’t the cause of inequality – it’s the solution<figure><img src="https://images.theconversation.com/files/292812/original/file-20190917-19040-1luxv5m.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">
</span> <span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/engineer-hand-using-tablet-machine-real-1140287369?src=xr2OcsWQI-kWpKC3AMvqtg-1-0">MNBB Studio/Shutterstock</a></span></figcaption></figure><p>Technology has been blamed for a lot recently. Automation and artificial intelligence have supposedly led to substantial <a href="https://www.forbes.com/sites/amysterling/2019/06/15/automated-future/#56616982779d">job losses</a>, reduced <a href="https://www.washingtonpost.com/opinions/lawrence-summers-its-time-to-balance-the-power-between-workers-and-employers/2017/09/03/b1c9714e-901e-11e7-8df5-c2e5cf46c1e2_story.html">bargaining</a> power for workers and increased <a href="https://rm.coe.int/discrimination-artificial-intelligence-and-algorithmic-decision-making/1680925d73">discrimination</a>. It is even <a href="https://www.technologyreview.com/s/531726/technology-and-inequality">blamed</a> for growing <a href="https://www.nber.org/reporter/winter03/technologyandinequality.html">income and wealth inequality</a> and, as a result, the presidency of <a href="https://bruegel.org/2016/11/income-inequality-boosted-trump-vote/">Donald Trump</a>, <a href="http://www.dannydorling.org/?p=6940">Brexit</a>, the rise of <a href="https://www.france24.com/en/20181116-income-inequality-financial-crisis-economic-uncertainty-rise-far-right-europe-austerity">far-right</a> populism in Europe and the spectre of <a href="https://www.weforum.org/agenda/2019/01/income-inequality-is-bad-climate-change-action/">climate change</a>.</p>
<p>In response, calls are being made for <a href="https://cpr.unu.edu/ai-global-governance-why-we-need-an-intergovernmental-panel-for-artificial-intelligence.html">global oversight</a> <a href="https://www.wired.co.uk/article/how-to-regulate-technology">and regulation</a> of technology and there are attempts to slow down its spread through <a href="https://www.federalreserve.gov/econres/ifdp/files/ifdp1230.pdf">protectionist</a> trade policies and political <a href="https://www.nber.org/papers/w11022">lobbying</a>.</p>
<p>But perhaps we should be careful about so readily blaming technological innovation for these social problems. In fact, our <a href="https://www.bertelsmann-stiftung.de/en/publications/publication/did/inclusive-growth-for-germany-18-technological-innovation-and-inclusive-growth-for-germany/">recent research</a> into the causes of rising income inequality in Germany suggests a lack of innovation and entrepreneurship is actually at the root of the problem.</p>
<p>We shouldn’t be trying to obstruct technological innovation and diffusion. Rather, we should face up to the challenge of <a href="https://www.merit.unu.edu/publications/working-papers/abstract/?id=8317">bringing back</a> to Western economies the entrepreneurship, innovativeness and business dynamism that characterised the <a href="http://ftp.iza.org/dp11194.pdf">years after World War II</a>, when growth was also more inclusive.</p>
<p>Germany is a particularly useful case to study. In recent decades, inequality has risen fast, and to <a href="https://makronom.de/produktivitaet-deutschland-muss-seinen-innovationsstau-aufloesen-um-die-ungleichheit-zu-verringern-28778">unprecedented</a> levels since unification. But unlike in the US, for example, there has been little <a href="https://www.sciencedirect.com/science/article/abs/pii/S0048733318302488">financialisation</a> of the economy and no significant outsourcing of jobs due to <a href="https://voxeu.org/article/globalisation-and-job-biographies-german-manufacturing-workers">globalisation</a>. Whereas the US runs a huge trade deficit, Germany runs a large trade surplus. Importantly, evidence shows automation has <a href="http://www.eu-nited.net/robotics/upload/pdf/2017-09_Robots_CEPR_Germany.pdf">created more</a> jobs in Germany than it has destroyed. So why is inequality rising so rapidly in the EU’s largest economy?</p>
<p><a href="https://ged-project.de/allgemein-en/how-germanys-weak-innovation-eco-system-is-driving-inequality/?cn-reloaded=1">We argue</a> that this is because consumers, investors and innovators in Germany are effectively “on strike”. Consumption by households, government and corporations could be much higher in Germany, but they are all <a href="https://www.ft.com/content/1f705ce8-543d-11e8-b3ee-41e0209208ec">saving massively</a>. Public and corporate gross fixed <a href="https://bruegel.org/2018/06/understanding-the-lack-of-german-public-investment/">investment spending</a> are dwindling. As a result, the domestic market, which is <a href="https://www.handelsblatt.com/today/politics/demographic-armageddon-aging-population-on-course-to-wipe-out-germanys-finances-within-30-years/23582318.html?ticket=ST-2589375-wnubOeZRbezgzvtYcPSR-ap4">also aging</a> rapidly, is not as attractive a place for entrepreneurs and corporations to stimulate innovation.</p>
<p>Without enough investment, labour productivity growth has significantly declined over the past three decades, falling from 2.5% in 1992 to 0.3% in 2013, eight times <a href="https://ec.europa.eu/info/business-economy-euro/indicators-statistics/economic-databases/macro-economic-database-ameco/ameco-database_en">slower</a>. This has been <a href="https://www.wsj.com/articles/germany-looks-to-curb-trades-union-power-1418300430">used to justify</a> a progressive reduction in real wages, union bargaining power and social security benefits to <a href="https://ideas.repec.org/p/sru/ssewps/2018-02.html">maintain competitiveness</a>. And this is one of the fundamental mechanisms driving German inequality.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/292813/original/file-20190917-19063-h0s4fh.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">Germans are saving too much money.</span>
<span class="attribution"><a class="source" href="https://www.shutterstock.com/image-photo/female-hand-money-cash-department-window-603947780?src=Ja1XHghbsIIbC1QwiQb3EA-1-1">SouthernTraveler/Shutterstock</a></span>
</figcaption>
</figure>
<p>This conclusion may seem at odds with common perceptions of Germany as a successful, technology-driven developed economy. Despite falling overall investment, the country certainly appears to be spending massively on stimulating innovation. German spending on research and development <a href="https://data.worldbank.org/indicator/GB.XPD.RSDV.GD.ZS?locations=DE">has increased</a> by around 50% in real terms between 2000 and 2016 and is now approaching an excellent 3% of GDP.</p>
<p>The question is: what is all this money buying? Why are productivity and economic growth not accelerating? Put simply, Germany’s innovation is less effective and less likely to be commercialised than in the past. For example, the ratio between the number of patents granted and the number actually applied for has been in <a href="https://makronom.de/produktivitaet-deutschland-muss-seinen-innovationsstau-aufloesen-um-die-ungleichheit-zu-verringern-28778">long-term decline</a> since the late 1980s. The relative quality of patents as measured <a href="https://onlinelibrary.wiley.com/doi/full/10.1111/ecoj.12314">by citations</a> has also declined. There are only four German firms among the world’s <a href="https://www.wipo.int/publications/en/details.jsp?id=4369">top 30</a> innovative corporations in high-tech areas such as 3D-printing, nanotechnology, and robotics. </p>
<p>And while total innovation spending is high, it’s concentrated in larger companies. Most small and medium sized firms in Germany are <a href="https://www.sciencedirect.com/science/article/abs/pii/S0048733317302081">investing nothing</a> or very little in innovation.</p>
<p>The decline in the impact of innovation also reflects the fact that entrepreneurship has been stagnating in Germany. The Mannheim Enterprise Panel <a href="https://www.zew.de/en/forschung/the-mannheim-enterprise-panel/">index of start-up activity</a> (a good measure of entrepreneurial dynamics) fell from 120 to 60 between 1990 and 2013, a 50% decline. This is partly because <a href="https://www.sciencedirect.com/science/article/pii/S0022199612001651">existing companies</a> have adopted conservative or defensive strategies to keep out new entrants to the market rather than use innovation to compete with them.</p>
<p>To reduce inequality, Germany needs innovation that will increase labour productivity. The country needs more firms, particularly small and medium ones, to develop and commercialise new technology and adopt a more robust spirit of entrepreneurship.</p>
<p>Achieving this will require critical changes in the innovation system, in particular to stimulate <a href="https://www.bmwi.de/Redaktion/DE/Downloads/E/einsetzung-der-kommission-wettbewerbsrecht-4-0.pdf?__blob=publicationFile&v=6">competition</a>, invest more in critical public <a href="https://bruegel.org/2018/06/understanding-the-lack-of-german-public-investment/">infrastructure</a>, and improve <a href="https://www.npr.org/2019/01/03/678803790/berlin-is-a-tech-hub-so-why-are-germanys-internet-speeds-so-slow?t=1568543761610">internet</a> connectivity and speed. Urgent measures are also needed to refocus the country’s vital <a href="https://www.economist.com/business/2018/03/01/german-cars-have-the-most-to-lose-from-a-changing-auto-industry">auto industry</a> away from being locked into out-of-date technologies. </p>
<p>Most importantly however the country needs to adopt measures that will spur on the government, consumers and companies to spend more. This will be good for innovation by <a href="https://ideas.repec.org/p/unm/unumer/2018047.html">creating the demand</a> for new products and services. And one way of funding this would be to <a href="https://theconversation.com/if-g7-are-serious-about-tackling-inequality-they-should-implement-our-global-tax-framework-122332">more effectively tax</a> big corporations.</p><img src="https://counter.theconversation.com/content/123476/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>The authors do not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Germany’s rising inequality shows what happens when consumers and companies don’t widely embrace innovation.Wim Naudé, Professorial Fellow, Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), United Nations UniversityPaula Nagler, Affiliated Researcher, Maastricht Economic and Social Research Institute on Innovation and Technology (UNU-MERIT), United Nations UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/850312017-11-12T09:44:28Z2017-11-12T09:44:28ZMalaria testing and treatment increases worker wellness – as well as effort<figure><img src="https://images.theconversation.com/files/192793/original/file-20171101-19861-19d1owf.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Irrigated fields, like these in Nigeria, increase the risk of workers getting malaria. </span> <span class="attribution"><span class="source">Arne Hoel / World Bank</span></span></figcaption></figure><p>Disease can have a major impact on our working lives. Take malaria. It affects <a href="https://www.cdc.gov/malaria/malaria_worldwide/impact.html">3.2 billon people around the world</a>.</p>
<p>Sub-Saharan Africa carries a disproportionately high share of the global malaria burden. In 2015, the region was home to <a href="http://www.who.int/features/factfiles/malaria/en/">90% of malaria cases</a> and 92% of malaria deaths, which occurs mostly among children. With over 7.8 million cases of malaria, Nigeria has the highest caseload on the continent. </p>
<p>As a result the <a href="http://www.csae.ox.ac.uk/workingpapers/pdfs/csae-wps-2014-13.pdf">cost of work days lost</a> as well as lower productivity can be significant. </p>
<p>People who work in agriculture may be particularly at risk from this disease, as <a href="http://www.theguardian.com/global-development-professionals-network/2013/jun/19/malaria-agriculture-irrigation-africa">irrigated land can be fertile ground</a> for mosquito breeding. It can have a major effect on their day-to-day lives and their ability to work and earn an income.</p>
<p><a href="https://theconversation.com/why-individual-nigerians-carry-the-heaviest-malaria-cost-burden-in-africa-57786">Studies</a> show that for individuals living in malaria endemic areas, households can lose up to a quarter of their income. </p>
<p>Improving labour productivity, which is often low in developing countries, is also critical to boosting economies, besides raising household income and the well-being of families and communities. </p>
<p>Can treating and testing for diseases like malaria in the workplace offer ways forward? We set out to find the answers through <a href="http://documents.worldbank.org/curated/en/570501509367049786/Productivity-and-health-alternative-productivity-estimates-using-physical-activity">a research project in Nigeria</a>. </p>
<h2>The impact of workplace treatment</h2>
<p>We’ve been studying how malaria affects workers at a large sugarcane plantation in Nigeria. Malaria is endemic in the West African nation. It not only puts a significant strain on the country’s health system but also lowers workers’ productivity levels. </p>
<p>Our work focuses on a programme that offers affordable, private malaria testing and treatment for sugar cane cutters. Our previous <a href="http://theconversation.com/how-malaria-testing-can-get-more-people-back-into-work-32067">study</a> showed that this type of work based malaria programme can help employees get back into work, and increase their productivity and earnings. </p>
<p>This time we fitted workers with accelerometers: small wearable activity monitors that measure their daily activity. We also registered their productivity, measured in number of canes cut, which determines their earnings. </p>
<p>Overall, being tested and treated for malaria increased the ratio of active hours relative to sedentary hours and the level of moderate physical activity by 27%. Earnings grew by as much as 25% among workers who were able to work and had access to the programme. </p>
<p>Interestingly, worker effort did not only increase among those who diagnosed with malaria. Workers who learned that they were malaria negative also showed increased effort, suggesting that they worked at lower effort in the first place, when uncertain about their health.</p>
<h2>Positive outcomes</h2>
<p>This <a href="https://degrp.odi.org/project/malaria-productivity-and-access-to-treatment/">new research</a> shows that health programmes can lead to workers becoming more active on the job and increase their effort in the workplace. </p>
<p>It’s also likely to lead to more workers wanting regular malaria screenings - an indispensable element of any control or eradication endeavour. Improved access to rapid diagnostic tests also makes this increasingly feasible. </p>
<p>The effect will be felt by both employees and employers. Increased worker effort could lower costs for firms operating in malaria endemic environments by reducing replacement costs for workers who fall ill.</p>
<p>Because of these wider economic implications, employers and governments should consider support of these type of programmes, and encourage their uptake. </p>
<p><em>For more information about this research, read the “Research in Context” brief on the DFID Economic Growth Research Programme website, which can be accessed <a href="http://degrp.squarespace.com/reflections/2017/10/31/productivity-losses-malaria-nigeria">here</a>. The latest working paper from this research on can be accessed <a href="http://documents.worldbank.org/curated/en/570501509367049786/pdf/WPS8228.pdf">here</a>.</em></p><img src="https://counter.theconversation.com/content/85031/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Andrew Dillon receives funding from the DFID-ESRC Growth Research program . </span></em></p><p class="fine-print"><em><span>Pieter Serneels receives funding from the DFID-ESRC Growth Research program</span></em></p><p class="fine-print"><em><span>Sarah Kopper does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Health investments raise worker productivity, but firms may not observe changes in worker effort. Technology that measures physical activity demonstrates these potential gains.Andrew Dillon, Assistant Professor, Michigan State UniversityPieter Serneels, Associate Professor of Economics, University of East AngliaSarah Kopper, PhD Candidate in Agricultural, Food, and Resource Economics, Michigan State UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/689002017-01-20T04:56:57Z2017-01-20T04:56:57ZThree theories for what’s causing the global productivity slowdown<figure><img src="https://images.theconversation.com/files/153542/original/image-20170120-5221-2x5p2i.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Why isn't new technology reflected in our productivity stats?</span> <span class="attribution"><span class="source">Shutterstock.com</span></span></figcaption></figure><p>There is a wide recognition by <a href="https://www.oecd.org/eco/growth/OECD-2015-The-future-of-productivity-book.pdf">economists and policy-makers</a> that “the large differences in income per capita observed across countries mostly reflect differences in labour productivity”. </p>
<p>Further, “productivity is expected to be the main driver of economic growth and well-being over the next 50 years, via investment in innovation and knowledge-based capital”. </p>
<p>This is what makes Australia’s <a href="https://theconversation.com/australias-productivity-problem-why-it-matters-8584">productivity slowdown</a> since the 1990s so concerning, as it coincides with a period of massive technological change and innovation. Nor is Australia the <a href="https://www.brookings.edu/research/the-productivity-slump-a-summary-of-the-evidence/">only country</a> to experience this phenomenon, or to be puzzled by it.</p>
<h2>A productivity puzzle</h2>
<p>Productivity is not an easy concept to define. Essentially, it is a measure of the efficiency with which we can turn inputs into outputs, based on new technologies and business models, a capable and educated workforce and effective management of firms and organisations.</p>
<p>During the mining boom, the deterioration of Australia’s productivity performance was <a href="https://theconversation.com/after-the-boom-where-will-growth-come-from-17358">masked by the boost to our terms of trade</a> from higher commodity prices. With the end of the boom, it has become apparent that new sources of growth must be identified, re-positioning Australia as a <a href="https://oecdinsights.org/2016/10/17/innovation-and-complexity/">more complex and diverse economy</a>, embedded in <a href="http://voxeu.org/article/io-linkages-and-income-differences-across-countries#.WGeK6fiwzFs.twitter">global value chains</a>. </p>
<p>Given the significance of this challenge, the Federal Government called in the Productivity Commission. Its discussion paper highlights the <a href="http://www.pc.gov.au/inquiries/current/productivity-review/discussion/productivity-review-discussion.pdf">“justified global anxiety”</a> that “growth in productivity — and the growth in national income that is inextricably linked to it over the longer term — has slowed or stopped. Across the OECD, growth in GDP per hour worked was lower in the decade to 2016 than in any decade from 1950”.</p>
<p>The most problematic feature of this challenge is that we lack a clear understanding of why productivity growth has slowed or stopped in Australia and around the world, despite a considerable amount of analysis and debate. </p>
<h2>Three possibilities</h2>
<p>Broadly, three reasons for the productivity slowdown have been advanced.</p>
<p>First, there is the <a href="https://www.bloomberg.com/news/articles/2016-09-12/the-great-debate-can-technology-transform-the-economy-again">claim by Robert Gordon</a> that today’s innovations do not compare in scale or impact with the breakthroughs of the 1990s let alone the wave of earlier transformations bringing urban sanitation, electricity, the telephone, television and commercial flight: “so it’s the lack of really profound economy-wide impacting innovation in the past few years that’s been the problem.”</p>
<p>Against this view, <a href="https://www.bloomberg.com/news/articles/2016-09-12/the-great-debate-can-technology-transform-the-economy-again">Erik Brynjolfsson maintains</a> that technological disruption is at least on the scale of earlier periods but has yet to demonstrate its full impact, which will require “a host of complementary innovations, just as it did in the industrial revolution: investments in education, reorganization of work, new policies…” </p>
<p>In particular, he anticipates “the core technology of artificial intelligence, machine learning, and combining it with knowledge in lots of different areas [will] create new products and services”. <a href="http://www.csls.ca/ipm/31/vanark.pdf">Others agree</a> that “the new digital economy is still in its ‘installation phase’ and productivity effects may occur only once the technology enters the ‘deployment phase’”.</p>
<p>Second, evidence suggests that productivity growth is still very strong, possibly stronger than ever, but <a href="http://www.oecd.org/eco/growth/Frontier-Firms-Technology-Diffusion-and-Public-Policy-Micro-Evidence-from-OECD-Countries.pdf">confined to “frontier firms”</a>. These tend to be younger, more innovative and profitable. They also vastly outperform the laggards, whose poor performance brings down the average. Here the productivity slowdown is thought to be due not to lack of innovation, but rather to a lack of diffusion from the frontier to the rest of the economy. </p>
<p>This stems partly from the growth of <a href="http://www.theatlantic.com/magazine/archive/2016/10/americas-monopoly-problem/497549/">monopolies and oligopolies</a> in many industries. They encourage the <a href="http://bostonreview.net/forum/suzanne-berger-how-finance-gutted-manufacturing">“financialisation” of corporate activity</a> at the expense of productive investment, particularly in R&D. Another factor is the <a href="http://worldmanagementsurvey.org/wp-content/images/2010/07/Report_Management-Matters-in-Australia-just-how-productive-are-we.pdf">uneven quality of management</a>, which can inhibit enterprise “absorptive capacity”, or the take-up of new ideas and business practices, even in a competitive environment. </p>
<p>Finally, there is the view that whether or not there has been a transformation of productivity performance as a result of technological change, it may not be reflected in the statistics due to <a href="https://www.brookings.edu/research/the-productivity-slump-fact-or-fiction-the-measurement-debate/">measurement shortcomings</a>. For example, the role of the internet in changing the way we communicate, assemble data and deliver services is simply not captured by traditional measures. </p>
<p>Most <a href="http://library.bsl.org.au/jspui/bitstream/1/1267/1/Measurement_of_economic_performance_and_social_progress.pdf">economists accept</a> that “what we measure affects what we do; and if our measurements are flawed, decisions may be distorted”. But some go further, <a href="https://books.google.com.au/books?id=CAVh-4uNLdAC&pg=PT36&lpg=PT36&dq=%E2%80%9Cthe+time+is+ripe+for+our+measurement+system+to+shift+emphasis+from+measuring+economic+production+to+measuring+people%E2%80%99s+well-being.+And+measures+of+well-being+should+be+put+in+a+context+of+sustainability%E2%80%9D&source=bl&ots=JJf09dAEFt&sig=kbwfI59KEoD5xztE7dheMfPRdug&hl=en&sa=X&ved=0ahUKEwiui4Gas8_RAhVKm5QKHe6PCgQQ6AEIGzAA#v=onepage&q=%E2%80%9Cthe%20time%20is%20ripe%20for%20our%20measurement%20system%20to%20shift%20emphasis%20from%20measuring%20economic%20production%20to%20measuring%20people%E2%80%99s%20well-being.%20And%20measures%20of%20well-being%20should%20be%20put%20in%20a%20context%20of%20sustainability%E2%80%9D&f=false">arguing that</a> “the time is ripe for our measurement system to shift emphasis from measuring economic production to measuring people’s well-being. And measures of well-being should be put in a context of sustainability”.</p>
<h2>We need reform</h2>
<p>Whatever measurement tools are adopted, <a href="http://www.mckinsey.com/global-themes/digital-disruption/harnessing-automation-for-a-future-that-works">productivity-enhancing reform</a> will be a key driver of long-term growth and jobs. It will enable us to compete globally not just on cost, which promotes a self-defeating “race to the bottom”, but on quality, design and innovation as the <a href="http://mckellinstitute.org.au/understanding-productivity-australias-choice">framework conditions</a> of a high wage, high productivity economy. </p>
<p>US Federal Reserve Chair Janet Yellen understood this well in a <a href="https://www.federalreserve.gov/newsevents/speech/yellen20160826a.htm">speech last year</a> on the role of productivity in restoring global growth: </p>
<blockquote>
<p>Though outside the narrow field of monetary policy, many possibilities in this arena are worth considering, including improving our educational system and investing more in worker training; promoting capital investment and research spending, both private and public; and looking for ways to reduce regulatory burdens while protecting important economic, financial, and social goals.</p>
</blockquote>
<p>In Australia, the Chief Economist reports that <a href="https://industry.gov.au/Office-of-the-Chief-Economist/Publications/Pages/Australian-Innovation-System.aspx#">“innovation-active” businesses</a> are 40% more likely to increase profitability, twice as likely to export and two-to-three times more likely to demonstrate higher productivity and employment.</p>
<p>Yet innovation has been <a href="http://www.theaustralian.com.au/business/opinion/innovation-critical-to-boosting-productivity-in-tough-times/news-story/5860a36fb64279c1d5b9517469156df2">getting bad press</a>, just like productivity in the past. It was not so long ago that productivity was viewed suspiciously as a ruse to make people work harder, when the real benefit was in working smarter. Now innovation is resisted on the grounds that it destroys jobs altogether. While this may be true in specific cases, it also creates jobs, and has done so historically. </p>
<p>The problem is that most newly created jobs will not be the same or in the same places as the jobs that are gone. It <a href="http://www.oxfordmartin.ox.ac.uk/downloads/academic/The_Future_of_Employment.pdf">has been estimated</a> that up to half the existing jobs in advanced economies will disappear or be changed beyond recognition in the next 10 years. This implies a <a href="http://www.ceda.com.au/research-and-policy/policy-priorities/workforce">much bigger emphasis on education and training</a> to prepare for the future. </p>
<p>To be credible, a new productivity agenda will have to ensure that the gains from innovation are <a href="https://www.allenandunwin.com/browse/books/academic-professional/sociology/Inclusive-Growth-in-Australia-Edited-by-Paul-Smyth-and-John-Buchanan-9781743311301">shared systematically</a> across the workforce and society, rather than accumulating in a few hands. This is the lesson of <a href="https://www.uts.edu.au/about/uts-business-school/news/podcast-navigating-new-age-discovery-and-upheaval">populist revolts</a> over centuries, including the current examples occupying the world’s attention. A new agenda will require a new social contract.</p><img src="https://counter.theconversation.com/content/68900/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Roy Green and Renu Agarwal have received funding from government and other agencies at various times to conduct research on productivity, innovation and management performance. </span></em></p>Since the 1990s productivity has been slowing in Australia and elsewhere. We aren’t really sure why this is, but here are a couple of theories that could explain it.Roy Green, Dean of UTS Business School, University of Technology SydneyRenu Agarwal, Senior Lecturer, Innovation and Service Operations Management, University of Technology SydneyLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/483672016-01-27T10:53:57Z2016-01-27T10:53:57ZWhat makes companies in one country so much more productive than in another?<p>In the 1950s, Ghana was <a href="http://cid.econ.ucdavis.edu/pwt.html">twice as rich</a> as South Korea. By 2011, the most recent year for which data is available, South Korea’s income was more than ten times higher than Ghana’s. </p>
<p>Yet these differences in productivity between the overall economies of the two countries are modest compared with the differences that appear to exist in the productivity of their manufacturing firms. My colleague Simon Baptist and I set <a href="http://ftp.iza.org/dp9157.pdf">up such a comparison</a> and were surprised by the size of these differences. </p>
<p>You could argue that rich countries simply have more resources so their companies are bound to be more productive – or have higher levels of output per worker. But <a href="http://ftp.iza.org/dp9157.pdf">my research</a> suggests that this is not the answer. </p>
<p>The surveys covered the main sectors within manufacturing, textiles, garments, furniture, food and electrical goods. While the sectors are the same, clearly the type of firms within them will be very different across the two countries. </p>
<p>Median output – the amount of garments or furniture produced per employee – is nearly 20 times higher in South Korean manufacturing firms than in Ghanaian ones. Whereas in South Korea the median worker produces US$193,000 of output a year, the comparable number in Ghana is US$10,000. </p>
<p>If you look at this in terms of the value added to the products by the worker, the differences are even larger: the average Korean worker produces US$117,000 and a Ghanaian worker only US$3,000, nearly 40 times less in terms of added value. The Ghana data comes from a panel survey of the country’s manufacturing firms over the period from 1991 to 2003 and the South Korean data is for the period 1996-1998.</p>
<h2>Making use of what you put in</h2>
<p>In our search for the source of that difference, we identified three factors. First, the amount of capital the firms employ; second, the importance of education and, third, the differences in the underlying efficiency with which the firms operate. </p>
<p>This concept of underlying efficiency is sometimes called “total factor productivity” and can be thought of as how much more effective a firm is at using all of its inputs – such as its capital and labour – than other firms. Most economists think differences in underlying efficiency are the most important reason for the large differences we see across countries and also across firms.</p>
<p>At first sight that also appears to be the case in our comparison of Ghanaian and Korean firms. In the first graph below, the vertical axis shows output per labour hour and the horizontal axis, capital per labour hour. The key point in the figure is the distance between the two lines, which measures the average differences in the efficiency with which firms in the two countries use capital and labour. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=398&fit=crop&dpr=1 600w, https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=398&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=398&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=501&fit=crop&dpr=1 754w, https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=501&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/106902/original/image-20151222-27854-sxyqqf.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=501&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">Labour productivity on capital per labour hours.</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>While there is some overlap, showing that some Ghanaian firms are as efficient as Korean ones, on average the differences are large. The chart implies that, on average, Korean firms produce six times more output with the same capital and labour as Ghanaian ones. That is one measure of underlying productivity.</p>
<h2>The importance of education</h2>
<p>Yet, the chart omits the possible role of education. When we included education in our analysis we find that its impact on output was massively larger in Korea than in Ghana. </p>
<p>The second graph below shows how education affects output per labour hour: the green line shows the effect for South Korea, the blue line the effect for Ghana. Most firms employ a workforce that have had on average between five and 15 years of education. Over this range, output per labour hour in South Korea increases dramatically; but for Ghana it scarcely changes. </p>
<figure class="align-center zoomable">
<a href="https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=45&auto=format&w=1000&fit=clip"><img alt="" src="https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=428&fit=crop&dpr=1 600w, https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=428&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=428&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=538&fit=crop&dpr=1 754w, https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=538&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/109146/original/image-20160125-19645-pcnm9q.png?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=538&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px"></a>
<figcaption>
<span class="caption">How does education increase labour productivity?</span>
<span class="attribution"><span class="license">Author provided</span></span>
</figcaption>
</figure>
<p>This analysis implies that all the differences in productivity across the two countries can be explained by how much more effective education is at increasing output in South Korea than it is in Ghana. </p>
<p>It is very hard to show whether these changes in education actually cause the differences seen in the chart. But it is clear that something associated with education is having very different effects in the two countries.</p>
<p>Several possible explanations suggest themselves. The first and most obvious is that the quality of education differs across the countries. A second possibility is that human and physical capital are being combined in fundamentally different ways in the two countries.</p>
<p>Take a simple example: a machine operator in South Korea operating a robot to produce garments may have the same number of years education as a machine operator in Ghana operating an electrical sewing machine. Even allowing for the substantial differences in capital – between a high-tech robot and a sewing machine – it is still very possible that one can be five times as productive as the other.</p>
<p>A third possibility is that the quality of the management is the key difference. Recent <a href="http://www.nber.org/papers/w20102">research</a>, provides some evidence that poor management may explain low productivity within firms, although further research is needed to explain how management is linked to the uses made of educated labour.</p>
<p>Taken together these explanations imply that while the quality of education makes a massive difference to manufacturing output in South Korea, it would be a mistake to think that investing in education alone is the answer to increasing productivity. It’s important to also consider the quality of that education, the technology the firms are able to employ cost-effectively, and the quality of the management.</p><img src="https://counter.theconversation.com/content/48367/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Francis Teal has received funding in the past from the World Bank, the African Development Bank and the UK's Department for International Development. He does not currently receive any funding from these organisations.</span></em></p>In the 1950s, Ghana was twice as rich as South Korea. It has since fallen a long way behind.Francis Teal, Research Associate, Centre for the Study of African Economies, University of OxfordLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/429092015-06-08T05:26:21Z2015-06-08T05:26:21ZTaking a stand at work is good for your health – in more ways than one<figure><img src="https://images.theconversation.com/files/84133/original/image-20150605-8711-1ewc1tq.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Get up, stand up.</span> <span class="attribution"><span class="source">Lane V. Erickson via shutterstock.com</span></span></figcaption></figure><p>Standing up at work can be good for your health. That is the finding of recent research <a href="http://bjsm.bmj.com/content/early/2015/04/23/bjsports-2015-094618">which links standing-based work to improved health outcomes</a>. It follows numerous other studies that show how our sedentary work habits <a href="http://jnci.oxfordjournals.org/content/106/7/dju098.full">may be killing us</a>. </p>
<p>The latest research, co-commissioned by Public Health England, looked at the health effects of prolonged periods of sitting in offices. It found that workers who sit at their desks for long periods are at increased risk of various physical illnesses, including cardiovascular disease, diabetes, and certain types of cancer. Sitting down for long hours can potentially lead to premature death.</p>
<p>The solution? Get a standing desk and get out of your chair more by working standing up and taking short active breaks. The research recommends at least two to four hours a day of standing-based activity and highlights the health costs of modern office work and the need to resolve them. The findings go as far as suggesting the need for a “revolution” in the way that offices are designed and organised.</p>
<h2>Novelty value</h2>
<p>Stories such as these catch the eye for their novelty, but there are some far broader questions about work-related health that they fail to address. Beyond the question of office ergonomics, there are some other crucial factors that influence our health at work. Though their novelty value is far less, they are likely to persist, even with the wider availability of stand-up desks and active breaks.</p>
<p>Workers who are given a stand-up desk won’t experience better health outcomes if they are also exposed to a heavy workload, intensive and long work hours, restricted work duties, and job insecurity. Indeed, in the face of these conditions, workers may view the encouragement of stand-up working as some kind of sop from managers – a hollow gesture that fails to address the real problems they face at work. </p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=400&fit=crop&dpr=1 600w, https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=400&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=400&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=503&fit=crop&dpr=1 754w, https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=503&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/84140/original/image-20150605-8706-11nr41z.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=503&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
<figcaption>
<span class="caption">A sop?</span>
<span class="attribution"><a class="source" href="https://www.flickr.com/photos/juhansonin/15303974934/in/photolist-pjmSyN-p6LJnv-6j7vQX-cTKxDh-8Vqccw-5y8aDy-8JKaWg-9T7zfF-aFasaN-eastHp-8FGMMX-agATgm-9EPVPB-dGaxz-aBScft-7CahsJ-8Gq5r-5SjC6f-aaFRA7-7oSLD8-6twA3P-wacWw-btmSnp-bsw8KC-c3WKt-9LS5T1-sJzC-5BmVWa-5q5di9-bDTntC-7oWD6C-eHxpq-9c2Tm1-btmRAZ-btmTeH-4tNyE-7UyBLT-8NpKuy-4s3WXA-4wuANX-AJtpB-67XUmo-7aJgCx-96RKBB-89NEwb-9hHpjg-9YN3g6-91GpNY-2qKgwi-69Y1V1">Juhan Sonin</a>, <a class="license" href="http://creativecommons.org/licenses/by/4.0/">CC BY</a></span>
</figcaption>
</figure>
<p>Work-related mental ill-health – including stress, depression and anxiety – <a href="http://www.acas.org.uk/index.aspx?articleid=3915">remains a significant problem in UK workplaces</a>. It is induced not just by the pressure of high workloads and high work intensity but also by the lack of control over work. Workers who lack autonomy at work find it more stressful. They also face greater physical ill-health and are <a href="http://www.sciencedirect.com/science/article/pii/S014067369704244X">more likely to die early</a>.</p>
<p>The problems of limited autonomy and its negative impacts on health illustrate the wider changes needed in the workplace – beyond redesigning office furniture and extending active stand-up breaks. It indicates the need for broader changes in the governance and structure of organisations. Workers need to have greater say over how they work and when. This would improve both their physical and mental health.</p>
<h2>Democratising the workplace</h2>
<p>Standing up at work, in short, cannot resolve the ill-health effects of low autonomy work. Nor can it make workers appreciate and enjoy work more, where it is imposed on them, without their direct input.</p>
<p>If they are to improve their health as well as well-being, workers ultimately need to stand up for their rights at work. They need to demand not just stand-up desks and more frequent active breaks but also more control over their work. They need to push for, and secure, access to more democratic forms of workplace governance, in which their voice is heard more loudly and more frequently acted upon.</p>
<p>A more democratic workplace would have a flatter management structure and would allow greater worker participation in decision-making. In practice, work would be managed cooperatively and would be arranged in a way that gives workers the freedom to decide the scope and performance of the tasks they are allocated. Such an environment would not only be more pleasant to work in but would also help to support better health outcomes. Indeed <a href="https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/355773/Briefing5a_Workplace_interventions_health_inequalities.pdf">evidence supports the health-improving effects of a more democratic work environment</a>.</p>
<p>Employers, of course, are much more likely to change the type of desks available in offices than change the management structure in organisations. But if they are serious about raising employee health and well-being they need to take these more radical steps.</p>
<p>“We need an environment where people feel much more liberated to do desk standing”, <a href="http://www.theguardian.com/lifeandstyle/2015/jun/01/office-workers-on-feet-standing-fours-hours-day-study-health?CMP=share_btn_tw">it has been argued</a>. In fact, what we need is an environment in which workers have the autonomy to take genuine decisions over the way they work. In other words, we need workplaces that value workers not just as instruments of production but also as real human beings with rights and needs of their own.</p>
<p>Only by creating more democratic structures at work can the health and well-being of workers be significantly and decisively improved.</p><img src="https://counter.theconversation.com/content/42909/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>David Spencer receives funding from, or has received funding from, FP7, EPSRC, and ESRC, but this article reflects the author's personal views.</span></em></p>Here’s what really needs to happen to make work healthier.David Spencer, Professor of Economics and Political Economy, University of LeedsLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/411532015-05-04T19:24:30Z2015-05-04T19:24:30ZExtreme heat poses a billion-dollar threat to Australia’s economy<figure><img src="https://images.theconversation.com/files/80186/original/image-20150504-23887-1ic1fop.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Heat is costing the Australian economy through productivity losses. </span> <span class="attribution"><a class="source" href="http://www.shutterstock.com/index-in.mhtml">Heat stress image from www.shutterstrock.com</a></span></figcaption></figure><p>When heat waves hit in summer, do you have trouble sleeping? And the next day, even though you are working in air-conditioning, are you a bit slower, your judgement a bit off, or your patience a bit frayed? </p>
<p>In a <a href="http://www.nature.com/articles/doi:10.1038/nclimate2623">paper</a> published today in Nature Climate Change, we and colleagues show that heat stress probably cost the Australian economy nearly A$7 billion in 2013-2014 through productivity losses such as those we’ve mentioned above. </p>
<p>That bodes ill for the future, with heatwaves forecast to get hotter and more common thanks to climate change. While we should continue to attempt to mitigate climate change, we need to take steps to adapt. </p>
<p>One of our most surprising findings is that you don’t have to work outside to feel the heat. Although outdoor workers report greater levels of productivity losses from heat, indoor workers aren’t immune. <a href="https://theconversation.com/too-hot-to-sleep-heres-why-11492">Poor sleep</a> is one possible explanation. </p>
<h2>The real cost of heat</h2>
<p>Regardless of the reason, productivity loss from heat was a major cost to the Australian economy in 2014. Of 1,726 respondents sampled randomly from the Australian population, 7% did not go to work on at least one day in the previous 12 months because of heat stress. </p>
<p>Ten times that number (70%) went to work but thought they were less efficient. On average people were less productive at work because they felt heat stressed on 10 days per year and cumulatively also lost about 27 hours per year. When the sample is extrapolated to the Australian working population, heat stress costs the nation A$6.9 billion per year in lost productivity.</p>
<p>This figure is conservative. It does not include productivity loss among those younger than 18 or older than 65, nor does not include the effects of heat on voluntary work or home duties. It also does not account for the economic impacts of people being less active in their leisure time, which is also likely to affect their well-being.</p>
<p>But it does include the efforts of workers to make up for time lost when it was hot – as many people feel compelled to do if they are to meet work obligations, even though it eats into their private time.</p>
<h2>Heat illness</h2>
<p>These losses put the cost of heat stress on a par with the cost of chronic health conditions such a migraines or back pain. These comparisons with disease are entirely apt because the heat survey was modelled on a disease burden questionnaire, the first time heat has been treated in this way. </p>
<p>Previously heat stress productivity losses have been calculated purely from physical models that rely on estimating the physiological impacts of heat and humidity rather than asking people how they respond to heat in real life.</p>
<p>Of course responses vary enormously. Some people soldier on whatever the weather, others wilt with the first bead of perspiration. </p>
<p>Curiously the outdoor heat effect was particularly strong among men – far fewer of the small percentage of women who worked outside acknowledged much heat stress.</p>
<p>Of those working indoors, the loss of time amongst managers cost employers most. This was partly because managers were better paid, so each hour lost cost more, but also possibly because heat increased stress levels and affected many skills a good manager needs – such as judgement. Indeed this may be another underestimate – we could not estimate the costs of poor decisions by heat-stressed managers or staff.</p>
<h2>Adapt now</h2>
<p>It could be argued that the high value of the losses in 2014 was because it was a record hot year. The trouble with that argument is that <a href="http://www.bom.gov.au/climate/current/annual/aus/">ten of the warmest years on record</a> for Australia have occurred since 1998, with predictions of many more to come. Heat may be expensive now. All the climate projections suggest that this is only just the start.</p>
<p>Fortunately, while the world edges towards climate change mitigation, adaptation is still possible. </p>
<p>The first step for employers is to recognise that heat is a problem. Setting <a href="https://www.jstage.jst.go.jp/article/indhealth/50/4/50_MS1352/_article">threshold levels</a> of <a href="https://www.safework.sa.gov.au/show_page.jsp?id=6681#.VUHEdVz3PaY">Wet Bulb Globe Temperature</a> (WGBT) above which work must stop is one way of managing heat in the workforce. </p>
<p>But our results suggest that productivity is reduced long before the workplace becomes unsafe and that the workplace may not be the only environment affecting productivity.</p>
<p>In particular heat effects are not confined to outside workers. This implies, just as with many medical conditions, that workers’ activities away from the workplace should be something in which employers take an interest.</p>
<p>Perhaps there will come a time when it is in employers’ interests to subsidise worker air-conditioning in the home. Employers should also make special effort to ensure workers, including managers, get enough water, pace themselves in response to high temperatures and are trained in how to cope with heat.</p>
<p>Modelling using just the wet bulb globe temperature data suggests that labour productivity in hot countries will<a href="http://www.nature.com/nclimate/journal/v3/n6/full/nclimate1827.html"> decline by up to 20%</a> by 2050 as the climate warms. </p>
<p>By 2080 <a href="http://www.tandfonline.com/doi/abs/10.1080/19338240903352776#.VUMAlpNkaK8">losses globally may be 11-27%</a>, even though some cold countries may benefit from greater warmth, and a <a href="http://www.daraint.org/wp-content/uploads/2012/09/CVM2ndEd-FrontMatter.pdf">recent report</a> suggested that productivity losses from heat stress will be climate change’s biggest economic impact. </p>
<p>Given that productivity improvement is seen as one of the keys to economic growth, rising temperatures can be viewed as a substantial and increasing threat to the Australian economy.</p><img src="https://counter.theconversation.com/content/41153/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Elspeth Oppermann has received funding from the NT department of health for research on heat stress, but not for the current study. </span></em></p><p class="fine-print"><em><span>Stephen Garnett has received funding from the National Climate Change Adaptation Research Facility and the Australian Research Council</span></em></p><p class="fine-print"><em><span>Kerstin Zander does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Heat cost Australia nearly A$7 billion in 2014, which is bad news given climate forecasts of hotter and more frequent heatwaves.Kerstin Zander, Senior Research Fellow, Charles Darwin UniversityElspeth Oppermann, Post-doctoral researcher, the Northern Institute, Charles Darwin UniversityStephen Garnett, Professor of Conservation and Sustainable Livelihoods, Charles Darwin UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/289012014-07-08T20:17:33Z2014-07-08T20:17:33ZLabour productivity has risen – but it’s not exactly a good news story<p>Reserve Bank of Australia Governor Glenn Stevens has ticked off on a major item on the “to do” list for Australian policy-makers: raise the rate of growth in labour productivity.</p>
<p>In his keynote speech at the 2014 ESAMACE conference in Hobart last week, Stevens presented data showing that labour productivity – the value of output produced per hour of labour time – increased at an annual rate of 2.0% in the three years to June 2013. </p>
<p>This is a large jump compared with the rate of just 0.9% per annum in the preceding five years, the period which saw higher productivity growth added to the “to do” list. Stevens interpreted the increased rate of growth in labour productivity since 2010 as evidence that “a number of sectors are making serious efforts to control costs and lift productivity”.</p>
<h2>Labour productivity is up</h2>
<p>The argument that the rate of growth in labour productivity in Australia has accelerated in recent years certainly seems robust. For example, looking at slightly different periods than Stevens, <a href="https://docs.google.com/file/d/0B_H1wGTm98W3RTZNV3JIc2FET2M/edit?pli=1">in a recent study</a>, I have also shown an increasing rate of growth in labour productivity over the past decade. I calculate that annual labour productivity growth in Australia was 1.15% per annum from 2003 to 2008 and 1.45% per annum from 2008 to 2013. </p>
<p>What I believe requires more scrutiny is the cause of the acceleration in labour productivity growth. To be able to think properly about the causes of growth in labour productivity it is important to understand one big fact: labour productivity differs hugely between industries.</p>
<h2>The mining differential</h2>
<p>Taking an average over the period from 2003 to 2013, I find that, for example, at the top of the list, an hour of labour in mining produced output worth almost $320, whereas at the bottom of the list, an hour of labour in the accommodation and food services industry produced output worth just under $32 per hour (expressed in 2010-11 prices). Levels of labour productivity in other industries were between these amounts. </p>
<p>The huge differences in labour productivity between industries are mainly driven by differences in the capital intensity of production between industries. Workers in mining have their labour combined with much larger amounts of capital equipment than in accommodation and food services, and hence an hour of their labour produces a larger value of output.</p>
<p>That labour productivity differs so much between industries has major implications for how we should interpret the causes of a rise in the Australia-wide average level of labour productivity.</p>
<h2>Ways to interpret the data</h2>
<p>One way in which labour productivity can rise is the same as Stevens suggested in his speech. This is if workers within all (or many) industries become more productive. For example, suppose that the value of output produced by an hour of labour in mining increased from $320 to $330 and in accommodation and food services increased from $32 to $33. Then that growth in labour productivity within industries will raise the average level of labour productivity in Australia. </p>
<p>There is, however, a second way in which average labour productivity can increase. Suppose that we take a worker who previously had a job in the accommodation and food services industry and switch their job to the mining industry. That worker used to produce output worth $32 per hour, but will now produce output worth $320 per hour. Hence the average level of productivity in Australia will increase because a worker has been switched from a low-productivity industry to a high-productivity industry. </p>
<p>What I find in my analysis of labour productivity over the past decade in Australia is that it is changes in the industry composition of employment – the second way I described above - that have been the main cause of growth. In particular I find that the increases in the proportion of workers in mining have been most influential. </p>
<p>Between 2002-03 and 2012-13 the proportion of total hours worked in Australia accounted for by the mining industry increased from 1.2% to 3.1%. Because labour productivity is so high in the mining industry, this has the effect of raising the average level of labour productivity in Australia. I estimate that, without this shift towards the high productivity mining industry, labour productivity growth in Australia would have been only 0.2% per annum from 2003 to 2008, and 0.1% from 2008 to 2013. So rather than the higher rate of growth in labour productivity reflecting sectors making “serious efforts to contain costs and lift productivity”, I would argue that most of the acceleration in growth simply reflects a faster rate of increase in mining employment.</p>
<h2>A different picture</h2>
<p>In fact, far from productivity improving within industries, the opposite has happened in some key industries. Between 2003 and 2013 labour productivity in mining fell from $458 per hour to $238 per hour. This is a massive decline and has had the effect of lowering average labour productivity in Australia. I estimate that if labour productivity in mining had remained unchanged from 2003 then the rate of growth in labour productivity in Australia in the past five years would have virtually doubled to 2.8% per annum. </p>
<p>Acceleration in labour productivity growth in recent years therefore should be seen to reflect a shift in employment to the high-productivity mining industry rather than workers within industries becoming more productive. What does this mean for the future of labour productivity growth in Australia?</p>
<p>In the short to medium term it is probably good news. The mining boom is not over, and while the proportion of workers in the mining industry remains at its current high level, we will continue to get the benefit of having more workers in this high productivity industry. We are also likely to benefit from growth in productivity within the mining industry. The level of labour productivity in mining is currently at an historic low. Falling commodity prices are creating an imperative for cost savings in mining that will drive productivity improvement. </p>
<p>But it is also clear that in the longer-run, we face an adjustment. Once the mining boom slows, and workers shift out of that industry into other industries with lower-productivity jobs, there will be a drag on the average level of labour productivity in Australia. Then we really will need improvements in productivity that come from within industries. </p><img src="https://counter.theconversation.com/content/28901/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Jeff Borland does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Reserve Bank of Australia Governor Glenn Stevens has ticked off on a major item on the “to do” list for Australian policy-makers: raise the rate of growth in labour productivity. In his keynote speech…Jeff Borland, Professor of Economics , The University of MelbourneLicensed as Creative Commons – attribution, no derivatives.