Monday, November 12, 2007

Harre and productivity

Laila Harre's 2007 Bruce Jesson lecture, Union Relevance in Aotearoa in the 21st Century, is now up on Scoop. It's interesting reading, not only for what it says about the problems facing the union movement, but also for what it says about the problems facing the wider economy. One bit I think is worth highlighting is this:

With unemployment and labour force participation at historic lows and highs respectively, already long working hours and an aging workforce demanding higher levels of productivity in future, the new right’s labour market chickens have come home to roost.

Notwithstanding John Howard’s more recent efforts to “catch down” with us, comparisons with Australia demonstrate that from a similar position in the 1980s, New Zealand’s low wages have discouraged investment in capital and skill, accounting for most of the difference between the two countries in the productivity stakes.

(Emphasis added)

Both the National Party and employer groups like to harp on about how wages can't increase unless productivity does. But improving productivity isn't a matter of people "working harder" - it is a matter of investing in technology and training so that workers can work smarter, and produce more for the same amount of effort than they could previously. And as Jordan Carter pointed out last month, those decisions are firmly in the hands of employers. So, if productivity isn't improving, they have only themselves to blame.

The government is trying to shift things in the right direction, raising the minimum wage and rejigging monetary policy to engineer a labour shortage and so creat upwards pressure on wages. Unions are also helping - by pushing for higher wages, they increase the costs of hiring another warm body, and so the incentive to invest in improving productivity. But at the end of the day, employers have to come to the party and make that investment. And so far, it seems they'd rather just bitch about it, and fight to keep wages low.

Meanwhile, the National Party seems to be firmly wedded to the "low wage, low skill, hire another warm body" model. But that model has reached its limit - there are simply no more warm bodies to hire. Unfortunately, rather than acknowledging this, and encouraging businesses to invest in their futures, they're instead casting around for a new source of warm bodies (hence their escalating attacks on sickness beneficiaries) - anything, it seems, rather than making our business leaders actually think for a change.