NZ Initiative welcomes Productivity Commission report

Wellington (5 February 2015): The New Zealand Initiative welcomed today’s Productivity Commission report highlighting the importance of productivity growth.

The report, “Who benefits from productivity growth? The labour income share in New Zealand”, shows that real wage growth is highest when labour productivity growth is highest.

The New Zealand Initiative’s Head of Research, Dr Eric Crampton noted, “In the long term, the only thing that can sustainably improve wages is productivity growth.”

“The report also shows how low productivity growth in the services sector, along with high housing costs, have eaten into workers’ wage gains.”

Dr Crampton noted that while the headline figures point to labour’s income share having declined over the past thirty years, real wages are up substantially.

“Because of capital investment and productivity improvements over the past several decades, workers get a slightly smaller fraction of a much larger national income. While labour’s share of total output dropped by about seven percentage points, total output doubled over the period.”

“More worryingly, recent growth has come not from productivity improvement but rather from adding more workers and more machines. Sustainable long-term real growth requires improving productivity.”

The report can be viewed here.

ENDS

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