This article is part of The Conversation series on Labor’s jobs summit. Read other articles in the series here.
One word is mentioned more than “job” and more than “skills” in the white paper for Thursday’s Jobs and Skills Summit. This is “performance”.
Which is strange, because while many of us think we know what performance is, and while many others think performance is easy to measure, it’s a remarkably slippery concept.
In a report released earlier this month, the Productivity Commission (yes, we have an entire commission devoted to productivity) makes the idea simple.
It is an equation:
productivity = output divided by input
The Commission reasonably concludes that producing more products (anything – flowers, healthcare, food) per unit of input while maintaining quality should be the goal of life.
Who wouldn’t want to clean a house in five hours instead of ten? Who wouldn’t want to build a car in five hours instead of ten?
Who wouldn’t want more for less?
You can use the free time to relax or do more of what you really want. And since you were producing more per hour of work, you could get a raise.
The commission tries not to tell you would get a pay raise. Instead, he says that where there is have Despite sustained wage growth above the rate of inflation, it has almost always been underpinned by productivity gains.
How much of the return on increased output per hour goes to wages depends, among other things, on bargaining power.
Since 1990, the share of profits (technically the share of total factor income) going to profits has risen from 24% to 31%, while the share going to wages has fallen from 55% to 50%.
But there should be no doubt that the only guaranteed way to improve the standard of living is to increase productivity. After a certain point, increasing the number of working hours will not help, because, according to the commission, “one can only work so many hours in a day.”
And will not use more resources. They are finite. The only sure way to keep getting more of what we want is to get more of what we have—that’s the definition of productivity.
And more recently, productivity growth has slowed to a trough, described in a summit white paper as the lowest in half a century.
Improving performance just got harder
It’s probably not because we ran out of ideas, though maybe because we used a lot of good ideas. When corporate negotiation was introduced in the early 1990s, when we were asked to find better ways of doing things at work in exchange for pay increases, we did it. But it became harder to keep finding the same big win.
More broadly, the extraordinary productivity gains we’ve had in manufacturing and agriculture have made them less important employers. Now most of us (almost 90%) work in the service sector. And services are hard to automate.
Even worse, it’s hard to tell what the outcome of many services is. There is a reason why the debate about government commitment to defense is framed in terms of spending. It’s hard to say what we’re getting.
Performance just got harder to measure
What about hairdressing? A barber who cuts twice as many heads a day is not necessarily twice as good, even if the quality of each cut remains the same. Part of good hairdressing services is the attention they offer to each client.
The same is true for health care and education. This is one of the reasons why the Australian Bureau of Statistics does not provide estimates of the performance of the “health and social care” or “education and training” industries, Australia’s two largest industries.
Read more: Why productivity growth stalled in 2005 (and isn’t going to get better)
And many education and health services are provided free of charge or subsidized, making fees charged a useless measure of output.
(The bureau plans to introduce “experimental” assessments of educational industry performance next year, but it’s running into trouble. It wants to define the outcome as “organized transfer of knowledge from teacher to student,” which gives an idea of how nebulous the whole idea is.)
Putting Quality of Work and Life on the Summit Agenda
Economy-wide, the Productivity Commission relies on the bureau’s rough and ready measure of gross domestic product per hour worked, but it is misleading for the same reason.
Labor came to office promising that every Australian living in a nursing home would receive an average of 215 minutes of care per day.
When this happens, it will be a brake on measurable productivity – GDP per hour of work. However, it will greatly improve the lives of Australians.
It makes sense for the summit to focus on productivity given that measured productivity growth has slowed, but that should only be part of the conversation.
Other, more personal things also matter, including the quality of our lives, the quality of our care, and the quality of our work—something that those present would be wise to keep in mind.