It's official: Australia's rate of improvement in the productivity of
labour returned to normal during the reign of Julia Gillard.
How is
that possible when big business was so dissatisfied and uncomfortable
during Gillard's time as prime minister? The latter explains the former.
According
to figures in a speech by Reserve Bank governor Glenn Stevens last
week, labour productivity in all industries improved at an annual trend
rate of 2.1 per cent over the 14 years to the end of 2004, but then
slumped to an annual rate of just 0.9 per cent over the six years to
2010.
This is what had big business rending its garments over the
productivity crisis. Egged on by the national dailies, chief executives
queued to attribute the crisis to the Labor government's "reregulation"
of the labour market, its failure to cut the rate of company tax, plus
anything else they didn't approve of.
Except that, according to
the Reserve Bank's figuring, labour productivity improved at the annual
rate of 2 per cent over the three years to the end of 2013.
So why
no crisis after all? Well, as wiser heads said at the time, much of the
apparent weakness in productivity was explained by temporary factors
such as, in the utilities industry, all those desalination plants built
and then mothballed and, more significantly, all the labour going into
building all those new mines and gas facilities.
No doubt much of
the recent recovery is explained by the many mines now starting to come
on line - meaning we can expect the productivity figures to remain
healthy for some years. Few extra workers are being employed to produce
the extra output - another way of saying the productivity of the miners'
labour is much improved.
But mining hardly explains all the
improvement, so what else? At the time when business complaints were at
their height, many businesses - particularly manufacturers - were
suffering mightily under the high dollar.
Many have been forced to
make painful cuts, abandoning unprofitable lines and laying off staff.
Some have gone out backwards, with the best of their workers being taken
up by rival employers.
Guess what? Such a process is exactly the
sort of thing that lifts the productivity of the surviving firms. In
their dreams, chief executives like to imagine their productivity -
which they perpetually conflate with their profitability - being
improved by governments doing things to make their lives easier.
But
requiring them to be lifters rather than leaners - which is pretty much
what That Woman did - usually gets better results. And since the dollar
remains too high and seems unlikely to come down anytime soon, it's
reasonable to expect the non-mining sector's productivity performance to
continue improving. Who told you productivity was soft and cuddly?
As
for the convenient argument that the productivity slump must surely be
explained by Labor's "reregulation" of the labour market under its Fair
Work changes, it's cast into question by some figuring reported in
another speech last week, from Dr David Gruen, of Treasury.
Gruen
examined the rise in nominal wages over the decade to March this year,
as measured by the wage price index, then compared this aggregate rise
with the rise for particular industries. In contrast to the days when
wage-fixing really was centrally regulated, he found a far bit of
dispersion around the aggregate.
Wages in mining, for instance,
rose a cumulative 9.7 percentage points more than the aggregate. Wages
in construction rose by 5.4 percentage points more and wages in the
professional, scientific and technical sector rose by 2.5 points more.
By contrast, wages in manufacturing rose by a cumulative 0.9 percentage
points less than aggregate wages. Those in retailing rose by 4.3 points
less and those in the accommodation and food sector rose by 7.6 points
less.
Notice any kind of pattern there? It's pretty clear. Wages
in those industries most directly boosted by the resources boom rose
significantly faster than aggregate wages, though not excessively so
considering it was a 10-year period.
By contrast, wages in those
industries worst affected by the boom-induced high exchange rate -
manufacturing and tourism - rose more slowly than the aggregate. Retail had its
own problems, with the return of the more prudent consumer, and its
wages grew by less than the aggregate.
That's just the dispersion you'd expect to see in a "reregulated" labour market? Hardly.
What
it shows is that we now have a genuinely decentralised and more
flexible wage-fixing system, delivering wage growth in particular
industries more appropriate to their circumstances.
If that's reregulation, let's have more of it.
