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Ditching the dogma: When does a focus on productivity become counterproductive?

"Productivity" is the mantra in current economic discussions. But it's too often undefined - and is it even relevant in an economy where care, personal services and creative sectors are growing in significance?

Image: Arianna String Quartet, Flickr/Ching, some rights reserved.

There seems to be a new trend in town – it’s not Pokemon Go or turmeric lattes or pouty photos on social media.

It’s the tendency to unquestioningly throw around the term ‘productivity’ as an unmitigated good – as an important goal of policy – without defining it, let alone discussing whether more ‘productivity’ is an appropriate goal for today’s economy.

Admittedly, the mantra of ‘we need to boost our economy’s productivity’ has long been with us – but it recently seems to be experiencing a spell of particularly high popularity in ministerial speeches, TV and media interviews, and in high level meetings.

In one of these meetings – a room full of highly educated people, people very senior in businesses or economic agencies or government – I asked: ‘but how are you defining productivity?’ 

The answer: ‘we haven’t really discussed that’.

This is concerning.

I asked if they were defaulting to the definition I was taught in my first year studying economics at university – output per worker. Yes, that was, apparently, what they had in mind: ‘Productivity gains are vital to the economy, as they mean that more is being accomplished with less’.

So the next question is if increasing the output each worker produces is necessarily a good thing. Why would we want more? And why would we want to do it with ‘less’, if less means fewer people?

First, more stuff? Really? In a world pushing up against and beyond environmental limits and planetary boundaries? When there is already more than enough to deliver sufficient food for everyone, if only we could share resources better and stop wasting so much? When the link between more stuff and enhanced wellbeing becomes tenuous after fairly modest levels of income?

Second, more output per worker? In an economy in which many people are simply trying to stitch together a semblance of a livelihood on short term contracts and too few hours, is pursuit of fewer people on the payroll a good thing for anyone other than those signing the pay cheques? And is it even relevant in an economy where care, personal services and creative sectors are growing in significance? After all, these are sectors where having more people involved might just lead to better outcomes and higher quality delivery.

And as economist William Baumol noted, with reference to a string quartet, the push for more intensity of work might end up compromising the quality of delivery and hence the experience, for both worker and customer. Ecological economist and former UK Sustainable Development Commissioner Tim Jackson explains that ‘when it comes to human services, continually stripping out the time spent in service actually becomes (in any meaningful terms) counter-productive, even though it is counted in economics as being productive’.

A recent Oxfam International report suggested we need to consider who gets the gains of any productivity increases. Doing so would reveal this is one type of decoupling that has occurred: a breakdown of the link between productivity gains and workers’ wages. To a great extent (especially in the US) owners of capital have siphoned off the benefits. Whereas workers – often due to their declining power in workplace negotiations – have been delivering more for their bosses, but without commensurate remuneration.

So why, with all these possible downsides, is productivity rolled out so often and so categorically as a good thing? It seems to me that it reflects an example of how out of date economic axioms remain entrenched in so many discussions about the economy in political and media circles.

It is the same with productivity’s twin-concept of ‘growth’ – another abstract term wheeled out without asking what sort of growth is wanted, for whom, and what trade-offs societies need to make in order to attain it. Instead an ‘adjective lipstick’ is painted on the growth pig – to paraphrase Sarah Palin. We have: ‘Inclusive Growth’; ‘Sustainable Growth’; ‘Green Growth’; ‘Shared Growth’; and ‘Low Carbon Growth’. Whitewashing an abstract term of dubious merit is not good enough.

But returning to productivity, there are some good reasons to put it forward as a goal. One would be if workers were able to negotiate to take the benefits – for example, as more leisure time, without less pay. This would be a good thing in our over-worked stressed out society. Another would be if pursuit of productivity gains were focused on those jobs that are unpleasant – using technology and automation to make these jobs easier would be entirely appropriate.

And finally, what if the sort of productivity being promoted was ‘output per unit of resources’? That would mean the same amount of material goods or services were being delivered, but using fewer resources. Given the extent of stress on the environment, an economy that chews up less would be a great turn of events.

Discussing how the challenges the economy faces and how it can be improved is a very necessary conversation. They would be even better if the terms used and assumptions made are on the table for debate and redefinition. A more cautious and nuanced approach to mantras such as growth and productivity might just lead to a wealthier country. Wealthier, of course, in the old English definition of ‘the conditions of wellbeing’...

About the author

Katherine is research and policy adviser with Oxfam.

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