The Productivity Commission’s (PC) latest review, released last week, bemoaned that Australia’s labour productivity last decade was the worst on record at just 1.1% per annum:
In response, the PC provided a bunch of recommendations to boost productivity, including further labour market deregulation that would tilt the playing field further in favour of employers over workers.
For example, the PC argues the current requirement of taking into account “the likely impact of any exercise of modern award powers on business, including on productivity, employment costs and the regulatory burden” should be replaced by “the needs of employers”.
In doing so, employers would be given even greater power in the wage setting process.
The Guardian’s Greg Jericho has penned an insightful piece slamming the PC’s recommendations, noting that while “productivity is important… just as important is who benefits from its growth”.
“Too often suggestions about improving productivity are actually about increasing the benefits to companies”, argues Jericho.
Jericho provides the below chart showing how real wages have lagged productivity growth for the past 25 years:
Moreover, “when we split up the past 32 years into four-year lots we can see that mostly the benefits of productivity have not gone to workers as the textbook would suggest”:
Accordingly, Jericho argues “there’s no reason to improve productivity if living standards don’t increase. Why make more with less time if doing so does not actually enable you to have a better life?”
Rather, “living standards can only improve if household incomes improve and thus we need wages to grow”.
“Too often productivity is used as a synonym for profits and this ensures changes to industrial relations can be sold as being about productivity improvements rather than power and profits”, argues Jericho.
Greg Jericho makes a compelling case. What’s the point of lifting productivity if the typical household’s living standards do not improve?
Does the economy exist to fatten the wallets of the wealthy owners of capitalism?
Or does it exist to raise the wellbeing of the typical rank-and-file citizen?
Sadly, the neoliberal Kool Aid that most economists and policy makers have drunk focusses on the former.
And with it, there is little wonder why we have witnessed the growing global disillusionment with free markets.
