Here’s a variation on an old joke, though not one economists find funny, they’re worried and say we should be too, as our quality of life depends on a solution.
Ready? An Irishman, a Brit, an American, an Aussie and a Kiwi agree to walk into a pub after work, once each has produced the same output value.
At 5pm, the Irishman walks in, job done. He waits alone, until the American joins him at 10.40pm. It’s 40 minutes after midnight when the Brit arrives, followed by the Aussie, at 1.10am.
At 3.40am the Kiwi enters the pub; but can’t stay long, as the working day starts again at 8am.
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* Higher productivity doesn’t necessarily mean higher wages
* NZ has highest workforce participation in OECD, house prices get blame
* Working longer hours but producing less: NZ’s poor productivity
* The Detail: New Zealand is not as productive as we should be, what does that mean?
There is no punchline, as it’s no joke. According to OECD figures, New Zealanders have to work 10.7 hours a day longer to produce the same amount as their world-leading Irish counterparts.
And it’s not due to lack of effort, New Zealand is 11th out of 34 countries for average hours worked, but its productivity is below the OECD average, when measured in GDP per hour worked.
It’s partially about our failure to adopt the technological tools to keep up, an over reliance on the No. 8 wire and “she’ll be right” mentality, if you will.
“Increasing productivity in the long run, is fundamental to improving well-being.” says Michael Bealing, an economist with the NZ Institute of Economic Research (NZIER).
“There’s a lovely quote from American economist Paul Krugman I like ‘productivity isn’t everything, but in the long run, it’s almost everything’.
“A country’s ability to improve its standard of living over time depends almost entirely on its ability to raise its output per worker.”
“We have to get away from just trying to throw more labour at problems, particularly cheap labour. We have to think about using technology and using more skills-based approaches, and to be prepared to be on a learning curve.”
So if working harder is not an option, what is the answer?
One answer is technology, working smarter. Companies such as Xero offer productivity apps, systems that speed up repetition and time-consuming tasks, such as invoicing.
Another solution is investing more in staff, giving them more say in the business, so that they are more invested in its output, says long-serving work-place negotiator Paul Tolich.
Some European countries have it over New Zealand says Tolich, who for four decades has worked in the fields of wages, skills and productivity.
“We can learn from the Germans, and the Scandinavians, and the Irish models, which place much more emphasis on what they refer to as social skills.
“They’ve got more consensus-based societies, where they respect people’s views, and they know you’ve got to work together as a team.
“The major problem with productivity is the fact we haven’t followed the German and Scandinavian models of factory-produced housing componentry.
“Basically you just assemble on the site with the plumbing, the electrical … the everything … already in the walls. They are moving to factory-produced componentry, and away from craft, whereas we are very craft-based.”
There are digital tools that allow even small businesses to work smarter, says Bridget Snelling, Xero New Zealand country manager.
“What this research is showing us is that we, as a nation, need to be more productive, but we can’t work our way to productivity… it would be humanly impossible for us to match the Irish – we’d have to work 55 hours more each week,” Snelling says.
“For us to even meet that we’d have to be working an extra day a week, based on a 40-hour working week. What we definitely don’t want people to take out of this is New Zealanders are lazy.
“A small business of five people, would have to employ one extra person to match the productivity output of the OECD average. In a tight labour market especially we know that that’s just not the answer.”
There are digital tools to speed up routine jobs, in the same way barcodes have sped up supermarket queues. Job management apps and electronic invoicing are two that would be a simple first step for small companies, Snelling says.
A hurdle is research showing 19% – about one in five – of New Zealand small businesses identified as tech adopters.
“So there’s definitely that mindset. What we need to work on is that mindset shift to actually knowing that it is OK, it’s not too difficult, and there are tools that are simple and easy to access.
“There’s a huge opportunity for improvement. And that’s a great thing… and there are ways we can get there. What I always like to say is a business doesn’t need to change everything all at once.
“Pick one or two pain points in your business, and look at how technology can alleviate those. Ultimately, they will get huge productivity gains out of that in the long term. So it’s a step by step thing.”
A 20% increase in the uptake of cloud computing could increase New Zealand’s GDP by between $3.5 billion and $6.2 billion through labour savings and productivity improvements, Xero and NZIER economic research shows.
While New Zealand sits with Lithuania, Poland and the Czech Republic for output, we work as hard as those in the United States and Australia. Our average hours worked per worker are 4% higher than the OECD average.
New Zealand has suffered from low productivity for decades, it is of growing concern to leading economists, and has been brought to the attention of politicians by the Productivity Commission.
Independent economist Cameron Bagrie has raised productivity as of crucial concern, as does Bealing.
New Zealand has used labour (both domestic and imported), to produce more, rather than investing in efficient technological solutions.
“We should be worried because we are working long hours to achieve the same outcomes as other countries,” Bealing says.
“There are many ways of getting output, people, time and effort is just one of the ways, but there are other ways there’s using machinery and digital tools.
“We need to have a conversation about investing more in education, and also look at New Zealand’s culture around educational achievement. It’s not all about being good at sport, it’s about being good at technology too.
“Education is critical for driving higher incomes, and for poverty reduction. On an intergenerational level if you educate the parents they can avoid poverty, and so will their children. That’s quite well established.
“There are some symptoms of short-term thinking in the market, and certainly in the under-investment in technology.
“There’s an opportunity to take a more long term view and build a country with higher incomes and better outcomes for labour, for skilled workers.”
Higher productivity is vital for sustainably higher living standards and incomes, the Productivity Commission says.
“We are one of a small number of OECD countries with both a low level of labour productivity and low productivity growth,” it warned.
“For the last 25 years or more New Zealand’s income per person has stayed at about 70% of that in countries in the top half of the OECD. New Zealand’s productivity performance has been weak for decades.”
Relative isolation, small domestic markets, and our industry structure have slowed the adaptation of new technologies and ideas.
Snelling says for a retailer who might have to take one day a month – or even once a week – to count stock, there are apps such as Cin7 that small businesses can use to digitise and automate inventory management.
“We see small businesses working so hard and really, when we look at this research, and see the stats, it’s telling us that we can be so much more efficient.
“What that would mean is that somebody who’s great on the tools and that’s the passion – they’re a fantastic builder or a fantastic plumber – what they have to do on top of their day job is all the admin that comes with being a small business owner.
“So whether that’s invoicing, chasing up invoices, briefing their workers, ordering supplies, that can take a huge amount of time. And it’s precious time, right? That’s time that they’re not actually able to be on the tools and charging for their services.
“And then if we think about the entire small business economy being more productive, that could add up to absolutely huge gains for New Zealand’s GDP.”
Auckland electrician Callan May employs two human staff, and two digital employees – Fergus and Xero.
Fergus is a job management software, Xero does invoicing. Both allow May to devote himself to the job during work hours, as well as shortening those hours to improve his quality of life.
At night he loads the next day’s jobs into Fergus. In the morning his employees check their phones to be told the job, the address, and the client’s name.
“It’s easy – they hit the button which automatically loads up in their maps, where they’ve got to go,” May says.
“All it takes for me to do is punch a few things in the computer and get it loaded up, and we’re good.”
Fergus also orders up items required for the daily tasks.
“One of the biggest drawcards is it integrates with JA Russell, my main electrical wholesaler,” May says.
“Every night we do our orders for our jobs and a reference gets allocated to that order. At midnight it gets sent through, when I wake up I can see all the orders on Fergus, and allocate it to the job.
“I don’t have to manually type in stock codes and quantities and stuff like that, it’s all done for me. It saves me a lot of time.
“All I have to do is push one button, and it’s straightforward. Before I started with it, I used to have to go and get the invoice from the day, print it off, make sure I put the right code in, that the pricing is right, and make sure the quantities are right.
Electronic invoicing is both a time saver, and a money saver. Job costs are less likely to be missed, as it allows him to invoice on the run, as he did the day the Sunday Star-Times spoke to him.
“I’ve done two jobs. I quickly went to a cafe, grabbed a coffee, in five minutes banged out two invoices for the job and the client has them already.
“I don’t have to get home this evening and think ‘oh, yeah those two jobs, what did I use? People do forget, don’t get me wrong, that’s where you lose all your money.
“Create the invoice, send it off – job done.”
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