Over recent months, a steady drumbeat has been sounding through the Coalition and more extreme elements of the business community, claiming that a return to the industrial relations system that existed from 2006 to 2009 would boost productivity in Australia. ¶ Alas, there’s precious little evidence to back this up. Productivity growth in Australia peaked in the early-2000s, and has been significantly lower in the naughties than it was in the nineties. If WorkChoices boosted productivity, you might have expected that Australia’s productivity would have soared in the period 2006-2009. But the opposite is true. In the WorkChoices era, labour productivity growth rates were lower than any 3-year period in recent times.
The supposed ‘productivity surge’ of the mid-1990s … was the product of measurement errors. The most important was the failure to take account of the increase in the pace and intensity of work. ¶ This speedup, and the resulting problem of work/life balance were described by John Howard as a ‘barbecue stopper’. They were apparent to everyone in Australia except the economists looking at the productivity statistics. ¶ Increased work intensity cannot be sustained forever, so my analysis predicted that the above-average productivity growth would be reversed as Australian workers reclaimed control of their lives in a stronger labour market. ¶ Although work intensity can’t be measured directly, we can look at related measures such as the number of people working extremely long hours and the proportion of workers compensation claims citing stress. These measures have generally declined over the last decade. ¶ As we might expect, the decline in work intensity has produced a reversal of the spurious productivity gains of the 1990s. But the economists who talked up the productivity miracle have not changed their tune.
If we are interested in the productivity slowdown, it would be useful to look at the ABS data. ¶ The worst-performing industry in terms of productivity decline over the last two and half decades is mining. Productivity is lower in that industry than in 1985. ¶ The second worse performing industry is gas, water and electricity. Its productivity is lower than in 1986. ¶ So the first question that needs to be asked is: Why is the productivity of these two important industries — one which is making record profits and one which has been privatised — declining so much? ¶ In none of these cases does any change in industrial relations and labour flexibility laws over the last year or two seem to be the issue. ¶ In these cases, it’s really a matter of declining productivity occurring because we are seeing a lot of investment that is yet to produce output. ¶ Those groups of industry together probably (in my guess) account for somewhere between 40% to 60% of the entire productivity slowdown in Australia. ¶ So it’s quite strange that people are not relating any of the facts to the discussion.