Over the weekend I was (as you do) dipping into the 1968 edition of the New Zealand Official Yearbook, in pursuit of some material I might write about later in the week.
As I flicked through the pages, I stumbled on a table showing labour productivity for the previous 12 years. It wasn’t an ideal measure. There wasn’t a good series of hours worked nationwide in those days, so this series was a measure of real GDP per person employed. But what really caught my eye was the numbers. Over only 12 years, labour productivity was estimated to have increased by 28.9 per cent. And this was in an era when experts, and official agencies, were starting to worry about New Zealand’s productivity growth, and to produce data showing that we were beginning to fall behind other advanced economies.
Here is the chart showing both the old data (for 1954/55 to 1967/68) and the same measure (real GDP per person employed) for the 12 years from 2004 to 2016. For the more recent period I have (a) used an average of the production and expenditure GDP measures, and (b) adjusted for a lift in measured employment of around 2 per cent in June last year, solely because of the change in the HLFS itself.
Over 12 years, they managed 28.9 per cent productivity growth in the 50s and 60s (with a fairly inward looking economy, with high levels of trade protection), and in our generation in the same period we’ve seen only about 7.9 per cent growth.
Of course, much of the slowdown is a common phenomenon seen across the advanced world, so this isn’t intended mainly as a stick with which to beat New Zealand governments specifically. But is a sobering reflection on how little material progress we, and other countries, are now making, relative to the astonishing progress seen in those post-war decades.
And, of course, we do have better data now. A rising share of part-time workers tends to dampen GDP per person employed. Here is real GDP per hour worked for the same modern period – ie 2004 to 2016.
Overall growth has been a bit stronger (12.1 per cent in total) on this better measure. But this measure also puts the New Zealand specific problems into sharper relief. We’ve had no productivity growth at all, on this measure, for four or five years. And that isn’t a global phenomenon, just a New Zealand one.
Could we manage 28.9 per cent productivity growth over 12 years again? It is only an average annual growth rate of a touch over 2 per cent, and the gaps now between New Zealand average productivity and that in the leading OECD economies are so large (they are more than 60 per cent higher than us) that it really should be achievable. But it would probably require, as a first step, giving up the rhetoric suggesting that really everything is just fine in New Zealand, and starting to focus on measures that might make a real difference.