Don’t believe everything you hear about productivity

Don’t believe everything you hear about productivity

There have been some peculiar contributions to the “productivity debate”, but the one released yesterday by the Australian Human Resources Institute takes some sort of cake of confusion.

AHRI, which produces a lot of quality publications on workplace issues, joined with the Society for Human Resource Management to hire the Economist Intelligence Unit to undertake a “a global assessment and benchmarking tool that would show the capacity of national economies to perform effectively and efficiently within workplaces that were fair, equitable and flexible places in which to work”.

The resulting report (or at least the summary of it) was dropped on those two journals of record on the productivity frontline, The Australian and The Australian Financial Review. And, you’ll never pick it, but both used the report as evidence that Australia is lagging behind in productivity and IR flexibility.

Now, you may recall the Economist Intelligence Unit from such reports as the ideological rant against the NBN that compared Australia to South Korea and was out by several million households and other basic factual errors, or its forecast of doom for Australian housing prices that was demolished by the National Housing Supply Council.

In this instance, the EIU has produced an outright weird report, so confusing that it’s entirely unclear exactly what they’re trying to measure. It combines three different areas?—?“policy and regulatory framework” for IR, “operating environment” and “economic performance”.

You’d think a category marked “economic performance” would be about economic performance, but it’s not. The top economic performer, according to the EIU, is Argentina, followed by Botswana, Uganda and Tanzania. Australia is 34th on the list, behind among others Italy, Ireland and Portugal. That outcome puzzled even News Ltd and Fairfax journalists, who noted it with an air of bemusement. It seems to have puzzled AHRI and SHRM too, because the report tries to explain why Germany lags below Italy and Ireland as well.

“… this is an opportune time to be reminded that each category ranking taken alone is based on raw numbers without the countervailing influence of other data such as qualitative and quantitative indicators of the cultural, institutional, legal, economic and political contexts that define each country.”

Paul Begley of AHRI kindly sent through the actual tool developed by the EIU to have a play with. Total factor productivity growth is one reason why Australia is so low?—?and we know multifactor productivity has significantly underperformed labour productivity in recent years. Another is elasticity of employment, which measures changes in employment as GDP changes. That accounts for why developing countries feature so prominently on the “economic performance” list.

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