Workplace Productivity speech

Hon Paul Swain
Minister of Labour
Launch of the Workplace Productivity Working Group Report
Tuesday, 30 November 2004

Good evening and thank you all for being here this evening to mark the launch of the Workplace Productivity Working Group’s report, The Workplace Productivity Challenge. It's great to see such strong representation from the business community, from unions and government (acknowledge colleagues). I'd also like to thank the Wellington Regional Chambers of Commerce, in particular Phil Lewin, for his assistance in hosting the launch this evening. I'd also like to acknowledge the presence of Phil O'Reilly from Business NZ, Ross Wilson from the New Zealand Council of Trade Unions and Rick Christie from the Growth and Innovation Advisory Board, all of whom will be speaking to you this evening.

Tonight is a significant occasion as the reason we are here is to discuss the importance of improving New Zealand's workplace productivity. There is now a strong degree of consensus across government, business, industry and unions about the need to take shared responsibility for improving our workplace productivity.

The workplace productivity working group was established in February 2004 by my colleague, the Hon Margaret Wilson and the group was given a brief to look at how New Zealand is doing in terms of workplace productivity, what practices are successful and what new initiatives might be needed to lift productivity inside the firm and promote high performing practices.

I'd like to thank the working group for its significant contribution and in particular I want to acknowledge the roles of Business NZ, the NZCTU and the working members – Peter Conway, Nick Clark, Owen Harvey, Jan Mottram, Katherine Percy, George Lafferty, Craig Ellison and Greg Miller. I think they have produced an excellent report with some practical recommendations that will move help to move the workplace productivity agenda forward.

I'd now like to cover briefly some of the reasons why workplace productivity is so important and the Government’s response to the workplace productivity report.

Our economic development strategy, the Growth and Innovation Framework focuses on growth through innovation. As Minister of Labour, my focus is about improving the performance of the labour market and the quality of New Zealanders working lives. This means having enough people in work with the right skills and positive workplace cultures – where everyone benefits.

This government recognises the importance of economic growth because of what it means for people – greater profitability, greater investment, higher incomes, better jobs, and more funding for the things we all value; services like education and health. In the last few years in the labour portfolio, this government has concentrated on creating a framework for productive employment relations' through legislative change. That period of work is now complete and the time has come to build on this work and focus on more active labour market policies including ways improve workplace productivity.

It's through innovation that we will improve our productivity performance and achieve stronger economic growth and greater well being for all New Zealanders. For the government's part, we're pursuing a number of policy themes: enhancing innovation in firms, building a skilled and talented workforce, strengthening our international connections and supporting economic development in sectors and regions through strong and effective partnerships and networks.

Ultimately, though, we all know where growth comes from – from enterprises and the people in them.

New Zealand’s economic growth has averaged around 4 % per annum since 1999. That’s significantly better than over recent history but the issue now is how to increase that growth in ways that do not put pressure on New Zealand's inflationary targets. Sustainable growth is what we need and improving workplace productivity plays a critical part in this.

On the back of good growth we’ve made tremendous progress in creating jobs and reducing unemployment.

At 3.8%, New Zealand's unemployment is now at its lowest point in almost 2 decades and the second lowest in the OECD (only South Korea has lower unemployment at 3.7%). This is certainly a great position to be in, but creates its own issues and skill and labour shortages are now one of the biggest issues facing all businesses. The option of employing more labour to increase output is not the realistic solution it once was.

More New Zealanders than ever before – over two million – are now in work. In the last four and a half years 230,000 jobs have been created and our labour force participation rate is up to 67%, again the highest in almost 20 years.

For some time the issue in New Zealand was trying to get economic growth and create jobs. Now our challenge is to maintain that growth and continue to improve our living standards. That is, to steal a phrase, the Workplace Productivity Challenge.

We, like everyone else, have two options for growing our per capita GDP – we can increase the number of hours worked in the economy and the amount produced in each of those hours. The first part is about labour utilisation rates, the second about labour productivity.

This slide shows that as reported by the OECD in 2003, New Zealand's GDP per capita is 39% lower than that of the US and that most of that gap is attributed to lower labour or workplace productivity. New Zealand labour utilisation rates are high by OECD standards but our labour or workplace productivity is not. Almost all OECD countries with higher levels of GDP per capita than NZ have higher levels of labour productivity than NZ.

We also have to be able to grow the economy in a way that enables people to have decent quality of life – recent research commissioned by the Growth and Innovation Advisory Board tells us that New Zealanders do not actually want growth at any cost. In an environment of labour and skill shortages it’s critical that workplaces are attractive places to be and provide the flexibility for people to enjoy other things that matter to them – such as work-life balance, family and community interests.

In practice, sustainable growth from improved labour productivity allows employees to receive higher wages and firms to increase profits without creating inflationary pressures. So for example, better staff training boosts productivity. And the gains are real – they’re not cost-plus.

The companies that participated as case studies are a critical part of the report as they show us at a real and practical level, what can be done to boost productivity in some of our workplaces, and help set the agenda for how to take these lessons to all businesses. Here’s another example of what’s happening out there.

The video clips you’ve seen show what the working group found – that there is a lot of good practice to learn from. Those best practices were distilled into seven key drivers of workplace productivity: Building Leadership and Management Capability, Organising Work, Creating Productive Workplace Cultures, Encouraging Innovation and Use of Technology, Investing in People and Skills, Networking and Collaborating, and Measuring What Matters – and these were all clearly demonstrated by Toll Holdings and Good Time.

These drivers or actions are complementary and productivity gains can be made using any of them depending on the needs and priorities of the particular business.

We need all businesses to understand that improving productivity is everyone's issue and that we all need to tackle it together – this means government working in partnership with businesses, unions, and industry and sector organisations to take this agenda forward together.

The report identifies four key actions to take things forward from here:

• Raising awareness of workplace productivity
• Creating new tools – eg benchmarking tools to help workplaces identify how they are performing
• Implementing strategies to lift productivity
• Measuring and evaluating – what works and where are the gaps?

From there, we have the next steps that need to be taken:

• Engaging with Business NZ, NZCTU and affiliates, ITOs, local and regional sector groups
• Developing more case studies
• Ensuring government programmes are focused and relevant
• Reporting to Cabinet with progress by 31 July 2005.

The way for New Zealand to build its productivity is for each of its businesses, to make a small improvement that suits them. There is no one size fits all and no solution that can be imposed. But if every business makes a small step towards the practices the working group has seen and identified, each workplace would be doing better and as a country we would see a huge gain.

That’s the final word from me. Again thank you to the working group.