Productivity growth across countries across time

This tweet caught my eye this morning.

The chart is from the latest weekly column from Martin Wolf, the economics columnist for the Financial Times.   It is a sobering reminder of what has been happening among economies rather nearer the frontier: productivity growth recently isn’t what it once was (even if the 50s and 60s are hardly representative historical decades).

But, of course, my main interest is in New Zealand.  And for OECD countries I prefer to use OECD data (which go back only to 1970).    Here is what a similar version of the chart above looks like using OECD data and adding Australia, Canada and New Zealand.   As with the chart above, I’ve ordered the countries from high to low based on average productivity growth in the most recent period (in this case, the last five years).

Real GDP phw OECD

In that most recent period (and, actually, for this decade as a whole) France has had the fastest productivity growth –  not something I’d have guessed –  and New Zealand brings up last place.  It isn’t that the green bar is missing for New Zealand, just that the average annual growth rate on this measure was 0.0 per cent. (Using my preferred measure of labour productivity growth, updated to include this morning’s release we do a little better for the last five years –  we come second to last (ahead of Italy) instead.)

And, of course, the pattern for New Zealand is a little different because we had that truly dreadful decade in the 1970s, when our productivity growth was clearly the worst in the entire OECD.

But here is how we’ve done simply relative to the G7 group as a whole.

NZ and G7 gdp phw

In not a single period has our productivity growth rate matched that of the G7 grouping as a whole.  We came close in the 1980s, but couldn’t match those leading industrial countries even then.  (And for the most recent period that conclusion holds even if use my preferred measure of New Zealand labour productivity.)   And whereas back in 1970, the level of labour productivity in New Zealand was very similar to that for the OECD as a whole, those growth differences cumulate, and now the G7 group has labour productivity just over 50 per cent higher than that in New Zealand.

Is something better possible?   Well, there is a loose relationship suggesting (as one might expect) that countries that had a lower starting level of labour productivity were also those with relatively faster productivity growth in recent years.  Catch-up can and does occur.   There were 10 OECD countries –  more than a quarter of the membership –  which had faster productivity growth than France over the last five years, often materially faster.    All of them were small.

That could have been New Zealand too –  after all, we now start so far behind the leading bunch –  but policy choices by successive governments (much the same regardless of which party occupies the 9th floor of the Beehive) meant it wasn’t so, and left us vying with places like Italy, Portugal and Greece (even the UK) for the unwanted poor performer award.