No. 109

Dave Oliver’s productivity delusion.

STONE the crows! The ACTU is misunderstood. Sure, industrial action under the Fair Work Australia regime is up, working days lost last year doubled.[i] Sure unions are pursuing what looks suspiciously like industry wide pattern bargains, under cover of Fair Work Act’s get-out clause which allows “bargaining representatives” to push for common terms across an industry if they are “taking into account the individual circumstances of an individual employer.”[ii]

But don’t think this has anything to do with reducing productivity – far from it. In fact, incoming ACTU secretary Dave Oliver argues unions are essential to improving efficient output. Just look at the way it slumped when John Howard won office. “We saw the door slam very quickly and very decisively on any process of engagement with the unions. When that happened we saw productivity take a dive,” he says.[iii]

And he is just the bloke to fix it by addressing management failings, “because I see that as a real issue that is hampering productivity.”:

I have walked into workplaces where you know they are in trouble, they’re a workplace that has not been upgraded or put investment into their technology in the last 20, 40 years plus. They’re the ones not investing in innovation. They’re the key areas of productivity that need to be dealt with, and yes, we’re very keen to do that. [iv]

Whether managers and workers want helping or not.

Dave Oliver has a point. A survey by the National Centre for Vocational Education Research (NCVER ) found a correlation between education and workplace innovation but that both business and educational institutions expect the other to come to them, which means nothing happens.

In the case of industry this is because business cultures are simply not designed to deal with new ideas, with HR policies, “not aligned to the company’s objectives … there was little evidence that they were fashioned with a view to improving innovation performance.” [v]

Perhaps the sort of businesses Dave Oliver intends to instruct are listening to arguments that the great productivity improvement that accompanied deregulation in the 1980s and 1990s is a bit of a fiction. Or perhaps they have decided that as the unions think productivity is a capitalist plot to flog us all harder there is no chance of getting industrial agreement to any innovation.

Not everybody is signed up to the productivity agenda. University of Sydney industrial relations academic John Buchanan reckons it is a con perpetrated on the workers:

Australia’s market sector output per worker has all but doubled since 1978. Real wages have only risen, on average, 20 percent. The question we need to ask is not ‘where will the productivity growth of the future come from?’ Before any robust answer to this question can be provided we first need to understand:

“Where did the productivity growth of the last 30 years go?”

And, rather than productivity, we should focus on fairness:

Policy makers need to give greater attention to (a) job quality and (b) fairer distributions of income (both functional and personal) if we are to move onto a sustainable trajectory of economic development. [vi]

John Quiggin, astute academic economist and committed contrarian commentator, also thinks the putative productivity pick-up 20 years back was a bosses plot, caused by “the increase in the pace and intensity of work”. It wasn’t productivity just exploitation and it ended when “Australian workers reclaimed control of their lives in a stronger labour market.” [vii]

Of course, productivity like reproductivity is universally admired, and for those in the Quiggin camp it can be acquired painlessly by public sector spending (to increase education and assist the marginally employable):

Australia needs genuine productivity growth, from technological progress, better skills and education and less waste of resources through unemployment and social exclusion. Despite the misleading statistics, productivity from these sources has improved over the last decade, and can be improved further. [viii]

This is harder than it looks. While everybody bangs on about productivity as the NCVER points out, nobody much wants to do anything about it.

And that’s because everybody ignores why it is urgently needed in the interest of all Australians.

Following Athenian economists, Professor Quiggin suggests it is so we can all have nicer lives:

Among the benefits of productivity growth should be more leisure and more pleasant working conditions. We don’t, in general, need to work harder, and we certainly don’t need to be told to “work smarter”. [ix]

Except we do. Coverage of Treasury secretary Martin Parkinson’s big speech last week focused on the deficit but he also made the point that we are living off, not building on, previous productivity increases:

After almost all of our growth in national income coming from productivity in the 1990s and early 2000s, over the last decade the contribution from productivity has more than halved – we have maintained the same rate of growth in living standards only because of the huge rise in our terms of trade. If, as we suspect, the terms of trade are unlikely to grow much, if at all, from here, this means that growth in Australian living standards will also slow unless productivity picks-up. [x]

George Megalogenis explained why on Saturday, in a piece demonstrating how difficult it will be to secure and sustain the surpluses we need to buttress the economy against external shocks. [xi]

If we are to maintain the health and welfare system, let alone spend more on education, we must expand the tax-paying economy and that requires more Australians working more productively, and probably harder for longer, plus paying more tax. Just how much more of the latter depends on how much of the former we do.

Dave Oliver will have to do more than lecture slothful managers. He is going to have to explain to his members that productivity is not a plot against the workers but a way to keep working families working and fund the schools and hospitals and pensions they rely on.

And Dave Oliver is going to have to explain to his comrades who run the unions that opposing productivity improvements now will be our era’s equivalent of the 1982 metal workers wage increase – a way to increase unemployment in the short term and lower living standards forever.

[i] Pip Freebairn et al, “Surge in disputes under Fair Work,” The Australian Financial Review,” March 9,

[ii]Mark Skulley and Nick Lenaghan, “CFMEU battle brews on building sites,” AFR March 9, Commonwealth of Australia, Fair Work Act 2009 S412 1b,1c recovered on March 10

[iii] Ewin Hannan, “New ACTU boss to take on Abbott,” The Australian, March 10

[iv] Ewin Hannan, “Warrior for the workers,” The Australian, March 10

[v] Andrew Smith et al, “Building the capacity to innovative: the role of human capital”  National Centre for Vocational Education Research, February 2012 @ recovered on March 10

[vi] John Buchanan, Submission to the Fair Work Review Act, @ recovered on March 10

[vii] John Quiggin, “No hard and fast rule for workers,” John Quiggin: Commentary on Australian and world events from a social-democratic perspective,” August 20 2011, @ recovered on March 10

[viii] Quiggin, ibid

[ix] Quiggin, ibid

[x] Martin Parkinson, “Introductory Remarks: Australia-Israel Chamber of Commerce,” March 7 2012 @ recovered on March 10

[xi] George Megalogenis, “Fiscal bipartisanship a well kept secret,” The Australian, March 10