Productivity and Employment (version 2): NZ’s Post-war Economic Performance

Keywords: Growth & Innovation; Labour Studies;

New OECD data bases enables the revision updating and extension of an earlier version of Productivity and Employment: New Zealand’s Post-War Economic Growth Performance. It still belongs to a series, Comparison with the OECD and Comparison with Australia.

An earlier version of this paper [1] used the Maddison data base which had some statistics of employment and hours worked, and allowed it to provide some estimates of productivity.[2] Recently the OECD published a more comprehensive. albeit shorter, data base.[3] This paper revises the earlier paper, incorporating the new data.

The structure of this paper may be summarised in the following truisms

(Output per worker) = (Output per capita) divided by (Employment as a proportion of the population),

and

(Output per hour worked) = (Output per worker) divided by (Annual hours worked per worker),

where Output is measured as GDP in the same (1990) prices across different countries.

New Zealand in an OECD of 27

OECD (2003) has a reasonably comprehensive data set for our purposes for all 30 OECD countries in 2000, excluding Poland, the Slovak Republic, and Turkey. The per capita GDPs are in Table 1. They are measure in 1996 US dollar prices and are ‘trend’, that is an adjustment has been made for the business cycle.

Table 1: GDP per capita: 2000

Country $US1996/
person
%
OECD
Luxembourg 41958 187.8
US 33120 148.3
Norway 27738 124.2
Canada 26878 120.3
Switzerland 26749 119.8
Denmark 26452 118.4
Iceland 26257 117.6
Ireland 25872 115.8
Japan 25183 112.7
Austria 24896 111.5
Belgium 24848 111.2
Netherlands 24596 110.1
Australia 24227 108.5
Germany 23166 103.7
Finland 22957 102.8
Sweden 22895 102.5
France 22829 102.2
Italy 22472 100.6
OECD 22337 100.0
UK 22056 98.7
New Zealand 18515 82.8
Spain 18375 82.8
S. Korea 16599 74.3
Portugal 16158 72.3
Greece 15085 67.5
Czech Rep. 13195 59.1
Hungary 10934 49.0
Slovak Rep. 10596 47.4
Poland 8822 39.5
Mexico 8354 37.4
Turkey 6428 28.8

The New Zealand GDP per capita is 82.8 percent of the OECD average, or 77.2 percent of the OECD27.

The Worker Force in the Population

Different countries have different proportions of the population who are employed. The ratio is a complicated summary of the effects of the population age structure (a youthful population tends to have a lower ratio, as does one with a lot of retirees), the labour force participation rate for those in the working ages, and the unemployment rate. Table 2 reports the ratios of the Working Age Population to the Total Population, of Employment to Working Age Population, and of Employment to Total Population.

Table 2: Percentage of Employed Total Population: 2000

Country WAP/
POP
EMP/
POP
EMP/
POP
Switzerland 67.4 80.6 54.3
Japan 68.0 75.4 51.3
Denmark 66.7 76.1 50.8
Norway 64.8 77.7 50.3
Austria 67.8 73.3 49.7
US 66.1 74.1 49.0
Iceland 65.1 74.9 48.8
Portugal 67.9 71.2 48.4
Canada 68.4 69.9 47.8
Australia 67.2 70.1 47.1
New Zealand 65.3 71.6 46.8
Germany 67.5 71.6 46.6
UK 65.4 70.9 46.4
Czech Rep. 69.7 65.8 45.9
Sweden 64.3 71.3 45.9
Netherlands 70.6 64.0 45.2
S. Korea 71.2 62.8 44.7
OECD(29) 66.5 67.1 44.6
Finland 66.9 65.1 43.6
Mexico 61.0 68.7 41.9
Luxembourg 66.7 62.1 41.5
Ireland 67.0 61.6 41.3
France 65.1 61.5 40.0
Belgium 65.5 58.6 38.4
Poland 68.6 55.3 38.0
Greece 66.9 55.4 37.1
Hungary 68.4 53.4 36.5
Italy 67.1 53.3 35.8
Spain 68.1 52.4 35.7
Turkey 65.2 48.9 31.9
Slovak Rep. n.a. n.a. n.a.

Pop = population, WAP = working age population; Emp = Employed

There is considerable variation of the proportion of the population who are employed. New Zealand is above the median and 105 percent of the mean. It is below the average for the proportion of Working Age People in the Population, but the higher proportion of Employed People in the Working Age Population compensates for this.

Output per Worker

Combining these two tables gives Table 3, GDP per worker, which is a measure of productivity.

Table 3: GDP per Employed Person: 2000

Country $US 1996
Luxembourg 100405
US 67450
Belgium 64161
Italy 62182
Ireland 60641
France 58417
Netherlands 56289
Canada 55428
Norway 54901
Iceland 53151
Denmark 51762
Finland 51175
Australia 51126
OECD(29) 50239
Spain 50107
Japan 49571
Austria 49483
Germany 49164
Switzerland 49153
Sweden 48869
UK 47183
Greece 40840
New Zealand 39870
S. Korea 37260
Portugal 33161
Czech Rep. 28992
Hungary 28961
Poland 23471
Turkey 20381
Mexico 19907
Slovak Rep. n.a.

Because New Zealand has a relatively high labour force utilisation and has a relatively low GDP, its GDP per employed worker is 78.6 percent of the OECD29 average, slightly below the equivalent GDP per capita figure/.

Hours Worked per Worker

Table 4 shows hours worked per employed person in a year.

Table 4: Annual Hours Worked per Worker:2000

Country Hours
S. Korea 2444
Czech Rep. 2017
Greece 1945
Mexico 1931
US 1867
New Zealand 1825
Spain 1823
Japan 1820
Australia 1802
Hungary 1799
OECD(27) 1798
Iceland 1789
Canada 1783
Portugal 1746
Ireland 1700
Finland 1680
Luxembourg 1643
Sweden 1634
Italy 1631
France 1600
Switzerland 1587
Austria 1576
Belgium 1570
UK 1568
Germany 1556
Denmark 1531
Norway 1395
Netherlands 1347
Poland n.a.
Turkey n.a.
Slovak Rep. n.a.

New Zealand proves to be the sixth to highest of the OECD27 in terms of hours annual worked per worker, some 1.5 percent, or 27 hours a year above the average.

(Note these figures do not allow for commuting times to work. The 2002 Urban Mobility Report found the following average daily commuting times in minutes: Britain (46) ; Germany (45); Netherlands (43); Greece, Ireland, Sweden (40); Belgium(38); Denmark (37); Austria, France (36); Portugal, Spain (33); Italy (23). The difference between Britain and Italy could amount to an extra 76 hours a year (if the workers commute 200 days a year), sufficient to have Brits spending longer in work related activities than Italians, despite the above tabulation putting it the other way around.

Output per Hour Work

Combining the last two tables gives Table 5 where productivity is measured as output per labour hour.

Table 5: GDP per Hour Worked:

Country $US 1996/hour
Luxembourg 61.72
Netherlands 42.32
Belgium 41.21
Norway 39.61
Italy 38.46
Ireland 36.70
US 36.23
France 35.78
Germany 32.29
Austria 31.62
Canada 31.51
Finland 31.38
Switzerland 31.04
Iceland 30.12
OECD (27) 29.19
UK 29.17
Australia 28.58
Spain 28.25
Japan 26.99
New Zealand 21.64
Greece 20.96
Portugal 19.12
Hungary 16.65
S. Korea 15.19
Czech Rep. 14.26
Mexico 10.33
Poland n.a.
Turkey n.a.
Slovak Rep. n.a.

New Zealand is 21st, one rank lower than on GDP per capita, at 74.1 percent of the average.

(Output per Worker Through Time

The OECD gives GDP per person employed for selected periods back to 1970. For the decade to 2000 New Zealand came joint second to bottom (with Switzerland) out of 27 OECD countries – only Mexico was behind. This cant be explained by the New Zealand worker redcuing hours substantially faster than for other OECD countries.)

Conclusion

Table 6 summarises the data.

Table 6: New Zealand as a Percentage of the OECD Average.

OECD(30) OECD(29) OECD(27)
GDP/capita 82.8 82.6 77.1
GDP/person employed n.a. 79.3 75.4
GDP/hour worked n.a. n.a. 74.1

The vertical pattern shows that because relatively more New Zealanders work, and because the work relatively longer hours, GDP per employed person and GDP per hour worked is relatively lower. (The horizontal patter shows that the countries with the poorer data bases are also lower productivity ones.

I am not as confident of the robustness of the labour force data as I have with the GDP data (and I have many concerns about that). I will be checking on the employment data base in due course. If there is a conclusion to all this, it is that labour productivity patterns are much as what one might have expected from the relative GDP per capita data – perhaps a little worse, because relatively more of the New Zealand population work, and they work relatively longer hours than the OECD average.

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Endnotes
1. B.H. Easton (2002) Productivity and Employment: New Zealand’s Post-War Economic Growth Performance
2. A. Maddison (2001) The World Economy: A Millennial Perspective (Development Centre Studies, OECD)
3. OECD (2003) The Sources of Economic Growth in OECD Countries. Paris.

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