The Way to the Third World
If you live in New Zealand, this is important to you
There's a lot of hysterical blether in New Zealand about tax cuts and relativity with Australian wages. The present government don't have any answers to the problem and the National crowd haven't shown any inclination to face the facts either. Any tax cuts promised or already committed to are just fiddling while the house burns down.
We're heading for Third World status at an alarming rate and we all must get off our backsides if we're to reverse the trend. We're not going to catch up with Australian wages, or with anybody else, until we address some important issues, not least of which is our dreadful productivity relative to the rest of the OECD.
Robbing the rich to help the poor eventually makes matters worse. The golden goose either emigrates or ends up with a reduced capacity to be plucked.
I created the graphs below using figures from the OECD's 2006 statistics. If you wish to see the gory details on the OECD's website, click here.
We put in longer working hours than most in the OECD
The horizontal axis of the graph below shows the ranking of hours in employment per person per year in OECD countries. We've been overtaken here recently, Icelanders were the only people who worked longer hours than us in the last figures I posted on this page. For half the year in Iceland it's too damn cold and dark to do anything but work, watch TV and maybe procreate.
The vertical axis is the killer. Working long hours could be justified if we were productive. Trouble is most of the countries on this graph work far fewer hours, but they produce a lot more than we do.
It's a recipe for disaster.
If you look at the next graph, it's even more stark. People in the top countries produce more than double our output per hour in employment
If we matched the performance of Luxembourg and Norway and if we assume that you're currently on $50,000 a year, you'd be taking home over $125,000. Even if we only matched the next six on the list you'd still be pushing $90,000.
What the graph also shows is that, as a general rule, the fewer hours people are employed (I deliberately avoided saying "hours they work"), the more they produce. That's why that graph tends to fall from left to right.
Now there are many explanations for that. Some positive, but mostly negative. In the final analysis, we need to do better.
Much better.
We're not producing the goods
Neither literally nor figuratively.
In 2005 we had the lowest productivity in the OECD. We're still more than 20% below the average. It's an horrendous situation. Next time you pass a roadworks or a building site you'll see a small part of the reason, but there's a far bigger cause than shovel-leaners.
Our position relative to other countries varies according to whom you ask, but whichever source you consult, if we're not at the bottom of the developed nations' heap we're close to it. For every hour worked, the French produce almost double what we do. That basically means that they're twice as rich as we are. Our great and glorious leaders are forever reminding us that we must grow the cake. We don't listen and they don't do anything much to help.
Quite the reverse – they keep spending more on bureaucracy and yet more on consultants to do the work of the unproductive bureaucrats they just hired. This leads inexorably to more inflation and so makes the situation worse, but that's another story.
How can your boss pay you Australian wages when you're only producing ¾ of the output of the average Aussie? We're all operating in the same market, so if your employer wants to stay in business he can't.
Oh Dear, what to do?
Next page: Worried about New Zealand's future?
You should be.