Here are some up to date statistics on New Zealand’s productivity from Grant Cleland of the Parliamentary Library in Wellington. He looks at the productivity of Labour, Capital and Multifactor.
Labour - is measured as a ratio of output to labour input. The change in labour productivity can also be broken into its component parts:
- The amount of capital available to be used by the labour force; and
- A change in multi-factor productivity (the change in output that cannot be attributed to a change in either capital or labour inputs).
The recent reduction in capital per worker (or, capital shallowing) could be the result of the recession, in that firms would have been unwilling to upgrade capital plant or invest in new plant when the demand for their goods and services was uncertain.
Capital – is measured as a ratio of output to capital input.
Multifactor – is growth that cannot be contributed to either capital or labour, such as an improvement in knowledge, methods or processes. An increase in multifactor productivity is commonly referred to as a technical change or efficiency growth.
Job creation has been a major concern for the United States economy as it tries to avoid a double-dip recession. US President Barack Obama recently promised to implement new tax incentives for companies that create jobs within the domestic economy – rewarding those that bring jobs into the US and eliminating tax breaks for companies that move jobs overseas. Although the unemployment rate in the US fell to 8.5% in December 2011, the lowest since February 2009, it is the impressive productivity figures which have gone largely unnoticed.
What are the reasons for this:
1. In 2012, with the weak economic conditions workers are concerned about job security so therefore tend to work longer hours and become more innovative in performing their job. This may involve them taking on more responsibility by doing other tasks.
2. When the recession bites, firms really have to think hard at how they can still maintain a revenue stream at the same time as seeing off the competition. This is where they become more innovative and risk further capital investment in order to remain solvent.
3. Panicked by the 2008 financial crisis and deepening recession, U.S. employers cut jobs pitilessly. They slashed an average of 780,000 jobs a month in the January-March quarter of 2009.
“My sense is there was much more weeding out of the weakest workers — the ones they didn’t want,” Kenneth Rogoff – Harvard University
The above is a brief extract from an article published in this month’s econoMAX – click below to subscribe to econoMAX the online magazine of Tutor2u. Each month there are 8 articles of around 600 words on current economic issues.
A hat tip to colleague Richard Wells for this site – Column Five Media – which has some outstanding infographics. I particularly like the following:
* Grenade or Aid – US Military Spending versus Foreign Aid
* America’s Most Bizzare Taxes – Jock Tax, Candy Tax, Crack Tax.
* The CPI Market Basket – How the CPI is calculated and its impact on individuals
* How Coffee Affects the Global Economy – Value of exports and imports of coffee as well as coffee production.
* Europe Trails the US in Productivity – productivity figures for both countries and why Europe is behind. See graphic below.
Most of us would agree that when the levels of output in an economy start to pick up there is an expectation that employment will also increase and vice-versa. So why on the chart below has economic growth slowed at the same time that employment is starting to increase. According to Mark Doms (Chief Economist, US Department of Commerce) this result is not unusual. The graph below shows that there has been a surprisingly weak correlation between private sector job growth and GDP growth. In late 2009 and early 2010 there was good GDP growth but weak employment growth – 2009 Q4 there was 5% growth but a reduction of over 5,000 jobs. Why is there this weak relationship between jobs and growth? Doms comes up with the following reasons:
1. Quarterly changes is employment and GDP are volatile. Short-term numbers are erratic and most economists will take longer-term figures to remove the volatility.
2. Firms adjust the number of hours worked in addition to changing labour numbers.
3. Productivity growth can change significantly from one quarter to the next. In the current recovery there has been a large increase in the productivity of labour as firms start to cut slack in their production process. This means that they have obviously been able to produce more goods with fewer workers.