Election 2013 issues: the way we work

In his admirable attempt to pack a full term as prime minister into 72 days and as an exemplar of political productivity, Kevin Rudd has indicated economic productivity as one difficult issue he wants to tackle. Industry and trade unions have been eager to join government to do something about the flat-lining of this most stubborn economic indicator but deep down understand that the solution to the productivity problem is far from simple. Productivity is the total value of goods and services produced (commonly called the gross domestic product) divided by the inputs (labour and capital) required to create that value. It is used as a measure of the overall efficiency of the economy. Increasing working hours or making additional capital investments may increase production but it won’t improve productivity unless the value of the outputs increases more than a simple linear relationship would predict. The economists tell us that working harder is not enough. We have to work smarter, improving the efficiency of our processes and/or increasing the value of the product, to have an effect on productivity. Two decades ago, Australia was doing very well on the productivity front. Businesses invested in new technologies, the workforce skilled up and management focused on improving quality and increasing the value of their goods or services. But it seems that the easy gains are over. Investment in new technology, improved skills and better management are now required just to stay in business, with the return on investment more likely to benefit the consumer who wants a lower price despite improvements to the product. What can rescue us from the clutches of this relentless law of diminishing returns?