Talking about the P-word

Higher productivity doesn't mean having to go nuts, like Lucy and Ethel in the chocolate factory

Higher productivity doesn't mean having to go nuts, like Lucy and Ethel in the chocolate factory

Heh heh, so what’s this P-word you want to talk about, then? Heh heh.

The P-word is “productivity”.

Ugh, I thought you were going to talk about something fun, man. What the hell do you want to talk about productivity for?

Well, a business executive here in Winnipeg named Nicholas Hirst wrote a commentary in the Winnipeg Free Press on Thursday about the importance of raising workforce productivity here in Canada in order to maintain our high standard of living. Here’s part of what he wrote:

“Now the productivity problem is raising its ugly head again… What I do know is that if we don’t change, we will gradually slip down the list of the world’s richer nations. Brazil, India, China and Mexico are all snapping at our heels. Our economic recovery could make us complacent. That’s not a luxury we can afford.”

So you disagree with him then?

No — I think he raises an important point, that we have the high quality of life here in Canada that we have today because we’ve gradually become more and more productive over time, making uncomfortable but necessary changes from time to time that kept us from falling into a rut.

Nick Hirst can speak for himself, but I don’t want to want to work 60 to 70 hours per week like some people do in Japan, never mind in some Indian- or Chinese-style sweatshop.

You won’t have to. People look at Japan and think “ooh, they’re so much more productive than us lazy North Americans — just look at all the hours they work.” The truth of the matter is that they’re actually less productive than we are. In fact, Japan’s adeptness for time-wasting is, without a doubt, one of the reasons why they can’t seem to get their economy out of neutral.

For example , look at these stats I found on the OECD’s web site. The OECD is a fairly well respected organization that does a lot of research into why some countries are economically better off than others. The Japanese produce less value out of each hour they spend working than the Italians or the Spanish, which are hardly the world’s most efficient economies. Their neighbours in South Korea get less value out of every hour of work than the Portuguese, the Slovenians, the Slovakians, the New Zealanders or the Greeks.

As for India, China, Brazil and Mexico, I think things are going to get interesting for them but not in a good way. You’re looking at four countries that have a toxic mix of corruption, exploitation, massive inequality, rising expectations and top-down “shut up and do as you’re told” cultures. They’ve also got huge populations; and countries with huge populations always have a tougher time maintaining stability without the use of force than smaller countries. Eventually they are going to boil over. It’ll be so exciting it won’t even be funny.

What countries do you think we should keep an eye on?

I’d keep an eye on places like Chile and Uruguay, which are quietly moving ahead by cleaning up their governments and educating their population. They’re good examples of former Third World countries moving toward First World living standards.

What does that have to do with productivity?

Good question. Running a clean, honest and ethical government and public administration is one of the best things that a government can do to encourage productivity. Corruption is inherently wasteful, and is often used to suppress competition, which in turn means that companies have less incentive to find more efficient ways of doing things.

Education is also extremely important, because that has a direct effect on the kind of jobs that people can have a fair chance of getting. For example, it would be very difficult to start a high-tech firm in Nicaragua because there are very few people down there with the skills that you need to run that kind of firm, and because the amount of corruption makes it difficult to run a company down there — among other reasons.

But Canada isn’t Nicaragua. What do we have to do to get our productivity levels up like Nicholas Hirst says we should? Should we stay later at the office or skip our lunch breaks?

I wouldn’t recommend any of those things. Skipping lunch or hanging around the office until six-thirty isn’t going to do a thing for anybody’s productivity. Maybe that kind of dedication is welcome in some places, but it’s a bit of a sham. It robs people of their incentive to find more efficient ways of doing things, because they’re being rewarded for stretching work that could be done in eight hours out over nine and a half hours — which equals lower productivity, not higher.

We’ve got most of the fundamentals right in Canada — we don’t have one-third of our workforce being self-employed like they do in Greece (it’s more like nine percent here); our mix of agricultural, industrial, service sector and full-time/part-time workers is about right; and a large number of our young people go on to college and university. All of those things are good for our productivity.

We don’t do enough research and development in Canada, though. About two percent of a country’s economy should be dedicated to innovation — creating new technologies and better ways of doing things. We’re a bit low there, and too much of the research and development that takes place in Canada is concentrated in Ontario and Quebec, and to a lesser extent in Alberta and B.C. The amount of research and development that takes place in the other six provinces and three territories is not all that much.

What does research and development do for us?

It’s an important way of growing the economy. Among the countries listed in those OECD stats I referred to earlier, every dollar spent on research and development produces about $23 in economic growth on average, so it’s a very efficient  way of growing the economy. When that dollar is spent by a business, the economic returns go up to about $29, and when it’s spent by a post-secondary institution — which provides a local labour force that business and industry can draw upon — it skyrockets to over $70.

What else needs to be done?

The amount of research and development you can do depends on how skilled your workforce is. So, it’s very important to get kids interested in learning from an early age and, if they have an aptitude for things like science and technology, to steer them in that direction.

Definitely we need to get the high school dropout rate down. Ten years ago, we were the worst province in Canada for the percentage of 25 to 34 year olds who had never finished high school. Hopefully it’s improved since, but it’s still something that needs to be worked on.

People who drop out of high school not only face limited job hopes, but their children also have a higher risk of not completing their education and of being out of the running for good, interesting jobs. Not to mention that it’s very hard on the economy to have large numbers of people with low levels of disposable income who also depend more on social assistance programs and, at the same time, pay less tax to support those programs. So it’s in everyone’s interest to make sure everyone gets the best possible education.

Perhaps we could even use a bit more holiday time. The average Canadian worked 1,727 hours in 2008, but the optimum number of working hours for a country with our per capita GDP — our level of economic output per person — should be about 1,680 hours per year. It suggests that there’s some slack there that could be gotten rid of without harming the economy. Taking some of the slack out would also give us a small productivity boost by taking downtime (especially during the summer) out of the productivity calculations. If a legal minimum of four weeks annual vacation is good enough for Australia, which is in very good shape economically, then three weeks should be good enough for Canada.

Lucky Aussies. None of this stuff sounds very scary or even controversial, so why do you call productivity the “P-word”.

It conjures up a lot of negative associations, so the politicians don’t like to touch the subject. As soon as people hear phrases like “we need to improve productivity”, they think they’re going to have their lunch breaks taken away and all kinds of other nasty things that wouldn’t do anyone a darned bit of good.

You should get off your damn computer and go outside and enjoy the weekend.

I know, I know…

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About theviewfromseven
A lone wolf and a bit of a contrarian who sometimes has something to share.

2 Responses to Talking about the P-word

  1. cherenkov says:

    No mention of unionization rates? Some people have blamed the increasing productivity gap in Canada v the US on our higher levels of unionization. I haven’t looked at that kind of data in years, so I can’t comment on if it’s still a concern.

  2. theviewfromseven says:

    That’s an interesting question, Cherenkov.

    I did a search to see what literature was out there. Once I filtered out the think tank stuff, I found a paper that suggested either a U-shaped relationship or a negative relationship, depending on whose study you looked at.

    http://www.praxis.ee/fileadmin/tarmo/Projektid/Too-ja_Sotsiaalpoliitika/Tax-benefit_Systems_and_Growth_Potential/PRAXIS_Working_Paper_27_20072.pdf

    (see p. 6)

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