If We Boost Productivity, We Can Improve Economic Growth?

Submitted By AnkiMalabika
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Introduction

As Tony Abbott quotes , “If we boost productivity, we can improve economic growth”. Productivity is a key determinant of a population’s per capita income over the long term. Those countries that adapt well to the changing economic environment and embrace new developments and innovations are more likely to boast high productivity, according to economic think-tank the Conference Board of Canada.

It is an economic indicator, which is of various forms, Labour productivity, multifactor productivity, technological productivity etc., these are affected by many economic factors that should be the paramount reasons for bringing about change in the economy. Research has provided an evidence of productivity growth as per MGI and others that increased productive and efficient competitors enter a sector, the global productivity levels increases. There have been causality issues between economic development and productivity but it is of paramount knowledge to understand the strong positive correlation between them.

While formulating a research question I considered taking into account the OECD countries that are on the brink of their development. Productivity outcomes, would best be analytical and clear in such countries. The fact that there is uncertainty in productivity benefits, made me more intrigued in carrying out my further research on this project. Some countries benefit from productivity and in some countries these benefits are observed over a lengthy period. Among all the types of productivity, it was the labour productivity that completely captivated my interests. My research became more focused on the effects on the change in the labour productivity in the economy.

While working towards the project I discovered various factors that caused these changes. Almost all the factors caused a simultaneous change in the labour productivity but some had lagged and leading effects as well. For example, raw materials used in the manufacturing sectors had a lagged effect on labour productivity as they solely relied on climatic conditions. Therefore these included seasonal effects. Hence I agreed with a research question: “How changes in different factors affected changes in the labour productivity in ten OECD countries?”

Recent data from the Conference Board, a business-research firm, show stagnant global labour productivity growth. The OECD countries statistics
The latest data from the Conference Board, a business-research firm, show (measured by GDP per employed person) fell to 1.8% in 2012 from 2.3% in 2011. The global financial crisis between 2007-2009 had an enormous impact on changes in labour productivity. In China average productivity growth fell from 12% a year between 2003 and 2007, to less than 9% between 2008 and 2012. Although growth is still strong, China's GDP per worker is only 17% of USA’s.
Some countries however, saw improvements in productivity last year In the Russian Federation, things took a turn for the better in 2010 (+3.8%) as well as 2011 (+4.2%,) after dropping a stunning 5.2% in 2009.

Such gains, though, can be a reflection of a faltering economy, in which fewer people are doing the work. In Spain, for instance, productivity has improved since 2007 but both GDP and employment have fallen (by 4.2% and 13.7%, respectively). Moreover, countries like Germany, which successfully limited job losses during the recession, report stagnant productivity. Output per person is also subject to the business cycle: when an economy starts to recover, firms often work their employees harder rather than
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