Productivity is too important for the Productivity Commission to neglect
The Productivity Commission needs to give itself a fair chance to do its job
New Zealand’s economy “is like a car stuck in first gear” said the Productivity Commission in 2019. It reinforced this sobering assessment last year: our nation “has gone from being one of the most productive economies to one of the least productive in the OECD.” Kiwis work longer hours to produce less than workers in other OECD countries. That affects our quality of life, from our ability to provide for ourselves and our families, to our capacity to volunteer in our communities, to our prospects of finding meaning and satisfaction in our employment. Oddly, then, the Commission’s latest inquiry has a fairly tenuous link with productivity.
Whenever there’s talk about something like productivity, some preliminary throat-clearing is required. Productivity isn’t the be-all and end-all. That’s also true of related fiscal and economic concepts like GDP growth and trading opportunities. We’re not put on this earth to serve it like some kind of idol; productivity matters only because it can help us to live fuller lives. But that’s no small or unimportant thing. As the Commission itself says, productivity growth supports higher material living standards, which supports current and future wellbeing, and it’s “people with the fewest social and economic resources” who wear the biggest costs of unproductive economies. The Commission was established in 2010 to advise the Government on how to improve productivity, which the Commission says means producing better results at less cost: “getting more (output) for less (input), rather than by making people work harder, wearing out plant and machinery or depleting natural resources.” The need to improve New Zealanders’ lives by improving productivity has been common ground on both sides of the political aisle since ages ago.
So it’s perplexing to see the Commission devote its scarce resources and statutory mandate to investigating the causes of persistent disadvantage. This an important topic; it’s less clear that it’s a job for the Productivity Commission which has taken on the job in its latest inquiry, A Fair Chance for All. For one thing, the link between productivity and persistent disadvantage isn’t obvious. There are strained efforts to make it in the terms of reference that set up the inquiry, which is supposed “to generate new insights about the dynamics and drivers of persistent disadvantage, and the incidence/impacts across different population groups, including social and economic factors.” But the requirement to consider how those impacts affect “productivity and economic performance” reads as something of an afterthought.
The first report released under the inquiry adds to the impression that the link between productivity and persistent disadvantage is somewhat distant. That report focuses on the need for and benefits of collaborative social services; again, an important inquiry but one not closely linked to productivity. To be fair, the report says that “breaking the cycle of persistent disadvantage” can contribute to higher productivity—but that’s true of many things. The report also stresses that:
Enduring solutions will require underlying causes, including colonisation, historic and current racism and power structures, patriarchy, and ableism, which are deeply embedded in New Zealand today, to be addressed.
I’m not sure what the Productivity Commission is supposed to do about patriarchy. It’s good for the Commission to take a broad view but when everything’s about productivity, nothing’s about productivity.
And it’s not as though disadvantage is a neglected subject. There’s been no shortage of official inquiries into poverty, inequality and exclusion. For example, the Welfare Expert Advisory Group and the Expert Advisory Group on Child Poverty have both produced significant reports in recent years. The Commission’s Terms of Reference even recognise this directly, describing those reports as part of the “considerable existing evidence,” along with material from the Tax Working Group. In fact, the Commission is told to “avoid duplicating parts of other major inquiries” like these. And with the Government’s pivot to well-being Budgets and the Treasury’s work on living standards, it’s hard to see why the Productivity Commission should be joining such a crowded field.
I don’t doubt the Commission’s good intentions, but there is a significant opportunity cost to their approach. In May last year, the Commission highlighted the fundamental importance of innovation and technology to productivity growth and said we need more research into productivity measures, how productivity growth occurs, and how workers contribute to productivity. Just six months later, it launched an inquiry into the not-obviously-related field of persistent disadvantage. Productivity growth could help everyone live better lives, but we’re failing to achieve it in any meaningful way. The Commission is the one organisation designed and created to fix this; they need to give themselves a fair chance to do their job.