Thursday, 17 Jun 2021

Andrew Barnes: A few ideas to fix NZ’s dire productivity levels

The data out of the Productivity Commission this week shows, sadly, that our low productivity rates had fallen even further behind the OECD average before the March 2020 lockdown.

At that juncture, New Zealanders were working longer hours – 34.2 versus 31.9 hours per week in other OECD countries – and were producing just $68 of output per hour compared with $85.

We are behind in both labour productivity and multi-factor productivity measures, and this is concerning – and fixable.

Covid has shown us another way. We learned through the Covid lockdowns that things we thought could only be done in a centralised office – costing many people hours per week in commuting time – can be done anywhere, and those former commutes can be converted to productive output.

As a nation, we have to recognise that our poor productivity can and must be solved if we are to compete in a global world.

The Productivity Commission report identified that while mining, professional, scientific, media, IT and other sectors had seen gains, the largest sectors – agriculture, forestry, fishing and manufacturing – backslid in productivity terms.

How do we address this?

We can take a lead from other countries that have taken an assertive approach to managing these high-labour industries.

As of late March 2021, Germany’s largest trade union, IG Metall, agreed a 2.3 per cent wage increase as part of a switch to a four-day week in a key industrial region; 3.9 million metal and engineering workers will benefit.

In the UK, the government is introducing a scheme to encourage farmers to retire. The move is because agriculture is largely dependent on subsidies, while farmers are generally older and therefore have been resistant to the introduction of new technology that can support productivity uptick.

This strategy is supported by new research from the University of Otago which found that using artificial intelligence (AI) alongside human workers could increase efficiency and productivity.

A high-tech world could shift us from a 9-5 to 9-3 workday, but avoiding AI would be expected to push workers into low-paid work while technology and tech-enabled workers take on high-value tasks.

It is easy to see the implications for New Zealand’s low-value economy. We have seen, with borders being closed, that relying on foreign fruit pickers isn’t a strategy, so we have to think about technology here – AI in automated picking and spraying.

If AI is a necessary element of a high-value, high-productivity economy, let’s start preparing our workforce for the impact of technology; we have to readjust how we study, train and work, and we need more and different skills to be able to operate.

Dr Jarrod Haar, a professor of human resource management at AUT and one of the researchers who analysed the original four-day week at Perpetual Guardian in 2018, has connected productivity to employee empowerment – if staff are allowed, for example, to automate traditionally manual systems, inefficient time will reduce and productivity will rise.

Dr Haar says, “What is most important is that workers are empowered to think about productivity and wastage and to make their work more efficient and effective.”

If a consequence of embracing AI is a six-hour workday or a four-day week, we will inevitably be working smarter, not harder.

Part of this would depend on government encouraging and supporting innovation to a greater extent; people don’t want to work low-value, low-paid jobs, so we need to make those low-productivity sectors more attractive and do them differently using AI and other technologies.

Productivity Commission chair Dr Ganesh Nana made this link directly, saying that “creating new technology and adopting new and better ways of working is critical to achieving effective change.”

He also pointed out, correctly, that longer work hours make improving living standards even more difficult.

Ultimately, this is a wake-up call for us to treat our low productivity as a reason to change, to address the gap and apply the methods we are finding of addressing overall output.

The four-day week is one of several possible models, and it is a proven one – you can get the innovation in a company while the benefits accrue to everyone; the company (and sector) get the productivity but the biggest benefits accrue to the community and society, with healthier and happier workers, more connected families and climate outcomes from reduced emissions caused by commuting.

Empowered workers will find efficient productivity hacks when there is a true benefit to them – and there’s a flow-on effect to the national economy.

– Entrepreneur and philanthropist Andrew Barnes is a former chair of Regional Facilities Auckland, the innovator behind the 4 Day Week and founder of a number of entities in the financial services and technology sectors.

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