Wages can't rise until productivity does. But what if it already has?

Wages can't rise until productivity increases, but what if it already has? Workers have been tarred as lazy or inefficient and warned that wages will not rise until there is a lift in Australia's low productivity rate. But an increasing body of research suggests our shift from a manufacturing-based economy to one dominated by human-delivered services means we are not capturing the full impact of productivity created by jobs in health, education and caring. "I think we've done a really bad job of talking about how we measure what productivity looks like," says Emeline Gaske, national secretary of the Australian Services Union, whose members work in community services. "For our members, say, providing support to women escaping family violence: What does productivity look like, in that environment?" she asks. "Is it how many women they talk to in a day? Or is it whether they're able to find a safe place for even one of those to spend the night with their children?" Measuring the outcomes of complex questions like these is an increasingly important challenge for our economy. What is productivity and why is it important? Productivity is about how much the economy can produce with a certain amount of "inputs": human working hours, capital (like money and technology) or both. It increases when you get more results — output — with the same amount of inputs, or you get the same amount with fewer inputs. Australia's productivity rate has been falling as our economy has become increasingly focused on producing services, such as health and education. That has been a problem in many economies, as Reserve Bank governor Michele Bullock observed recently: "It's just much harder to find productivity improvements … Australia is in that situation as well. We're not alone. But it doesn't mean that we shouldn't be trying to do something about it." More than 60 per cent of our annual gross domestic product (GDP) is created by services. We are now locked in a key economic argument: Can a system that's proven precise at measuring how many toasters a factory worker can assemble in a day, measure an economy based on care-giving and teaching? 'Soft outcomes' harder to measure Georgia Harraway-Jones works with people often experiencing overlapping issues of addiction, mental health and poverty. "Nobody accesses homelessness services for fun; people are in the worst, dire situations," she says. "Really tough circumstances." At a motel in Melbourne where she helps people find temporary accommodation, Ms Harraway-Jones reflects on the impact she has been able to have for some clients. "Where they moved from being homeless, living in a van, to being housed, to being supported to complete some training, to then being able to work and contribute back," she says. She is concerned that blunt measures of outcomes don't take into account what workers like her are trying to achieve. "Looking at productivity and looking at the inputs and the outputs and the soft outcomes, we really need to find ways to measure just the social impact that these social and community services have on people's lives." Productivity gains to 'look very different' in future The Productivity Commission is the government's think tank and has been vocal about the need to boost productivity so workers can earn more and enjoy higher living standards. Reports have blamed weak business investment, called for increases in taxes on powerful firms that dominate sectors so that other more competitive businesses might see tax cuts, and to reduce regulation on business. Australia is not unique, says deputy chair Alex Robson. Because our economy has shifted from making things to intellectual labour and human services, we need to change how we measure. "It's not a matter of replacing people with equipment in factories, or better ways of farming, or more efficient ways of mining," he says. "But what it means is that productivity gains are going to look very different in the future from what they have in the past." It might be that, instead of lifting the number of patients a nurse deals with in an hour, we focus on care that lowers the risk of expensive re-admissions. "We know that these costs are coming through the pipeline," he agrees. "Is there a way that we can spend a bit of money today and invest to avoid those future costs and get that prevention right?" The growth in our care sector, things like the National Disability Insurance Scheme (NDIS) and aged care, means we will need to look at what Professor Robson calls the "difficult and controversial" way we measure productivity. 'Ultimately what we care about is outcomes' About one in six workers are employed in health, social services or education, and Toby Phillips despairs that we simply count the cost of delivering those services and the amount they get used. The Centre for Policy Development's (CPD) economic director and co-author of a report about this issue says we should count the things that really matter. "If our patients are living healthier lives, if our students are getting a better education, and if we're doing all of that for the same dollars, that should represent a productivity improvement," he says. "The way that we measure productivity and the way the statistics are reported is that doesn't show up at when we get better outcomes and better social value from these sectors." Mr Phillips says research suggests altering how we measure to capture that value vastly changes what we think about productivity: - A Productivity Commission report that adjusted to include "patient outcomes" suggests productivity is growing at 3 per cent annually; - Another looking at education found productivity was 1.3 per cent higher than estimated, once learning outcomes were included; - The Australian Bureau of Statistics found "the public sector is actually getting more efficient per dollar spent". It sounds small. But, in the context of trying to boost our productivity, these numbers are huge. "The problem is in the very next breath, these same publications that shape government decision-making go on to say part of the reason the productivity slowdown is happening nationally is because of the growth of these sectors," he observes. "And that just isn't true." Productivity not as simple as working harder If community services worker Georgia Harraway-Jones doubled her caseload of 19 clients (and some dependent children), it would theoretically improve her productivity. But she is blunt about the outcome. "I wouldn't be able to do it," she says. "The work I do is really quite complex; it's very involved, there's a lot of nuance." Describing clients with alcohol and drug dependence, mental health issues and complex trauma, she says a bigger caseload would not allow time to address the factors that contribute to people being homeless. "Frankly, they would receive worse outcomes." Helping people lead more stable lives is not easy. And it is not easy to quantify, either.