Is productivity really a magical fix?
These two points demonstrate that productivity is no magic bullet for the other challenges facing Australia’s labour market.
Nor is it credible to blame lack of productivity for another big issue on the summit agenda: the historically weak growth in wages over the past decade.
Business leaders like to insist wage increases aren’t possible without productivity growth. But the actual problem for the past decade has been the opposite: productivity grew while real wages stagnated – and are now falling rapidly due to the surge in inflation.
In fact, the relationship between the two (which many economists assume to be automatic) has been broken for much longer.
Since the mid-1970s, economic and labour market policy in Australia deliberately undermined wage growth through measures such as weakening collective bargaining, downgrading the award system to a safety net, vilifying and policing unions, and (for many public sector workers) simply dictating minimal wage gains.
Not surprisingly, all this kept wage growth well behind productivity. As a result, the share of labour compensation in GDP has fallen by 13 percentage points since the mid-1970s, reaching an all-time low of 45% this year.
The share of corporate profits in GDP, not coincidentally, increased by a similar margin, and is now at record highs.
These tectonic shifts in national income distribution refute the common assumption that workers are automatically paid according to their productivity.
Workers can be rightly sceptical that a generic commitment to revitalising productivity growth will automatically solve the problems they face – falling real wages, endemic insecurity and the erosion of collective representation.
To build a genuine consensus on productivity, therefore, the jobs summit must also advance a convincing vision for how the gains from productivity growth will be more fairly shared.