April 16, 2006
The Work Less Party welcomes the interest of the BC Progress Board in a topic that is dear to our own hearts: productivity. As the Progress Board states, “Productivity is very important.” Indeed, it is too important a topic to leave to those who only look at one side of the coin. Therefore we wish to open up dialogue by pointing out something the BC Progress Board overlooked in their discussion paper: leisure.
Andrew Sharpe, executive director of the Centre for the
Study of Living Standards pointed out several years ago that one of the chief
benefits of increased productivity is that it “would also give Canadians the
option of choosing more leisure
time, a component of economic well-being that is currently not incorporated
into GDP.” The BC Progress Board’s discussion paper, however, doesn’t recognize
that option. The word “leisure” doesn’t appear once in the report. Indeed the
report’s focus appears to be exclusively on increasing the numerator of the
productivity equation while leaving the denominator unchanged.
Productivity
is not a “simple sum in arithmetic” and making a one-sided assumption – as the
Progress Board does – leads to one-sided and possibly misleading calculations.
The Board’s paper begins its assessment of BC’s productivity performance with
the claim that “Canada has consistently experienced declining relative
productivity since its strong performance in the 1970s.” The statement is
accompanied by a chart that shows Canada’s ranking on productivity among 24
OECD countries declining from 5th place in 1970 to 17th
in 2004. Let’s take a closer look at that decline.
It is
crucial to understand that the productivity being referred to in the chart
equals total output, as measured by gross domestic product (GDP) divided by
hours worked. The paper only makes that essential point clear some five pages
later. The fact that productivity is a fraction means that it could be
increased either by increasing the numerator, GDP, assuming that hours are
constant or it could be increased by reducing the hours of work (the
denominator), assuming a constant level of GDP.
Of the 16
countries that ranked ahead of Canada, only in the United States did workers
average more annual hours in 2004 than in Canada (See Appendix
“A”). Part of the policy mix that enabled the other 15 countries to pass
Canada in productivity was shorter working time. Australia had only a small
productivity edge over Canada – too small to be significant. On average,
Australians worked 37 fewer hours in 2004 than Canadians. Meanwhile, in the 14
European countries with significantly higher productivity levels than Canada,
employees worked an average of 245 fewer hours in 2004, or roughly 6 weeks
less, than Canadians. Seven European countries that worked significantly fewer
hours annually surpassed the US in productivity. Those countries were Austria,
Belgium, France, Ireland, Luxembourg, the Netherlands and Norway.
This is not to say that a reduction in the hours of work will automatically or always increase productivity, only that it is one of the important factors determining productivity. It is curious that this possibility is not mentioned at all in a 38 page paper that somehow manages to repeat the mantra of “productivity” 399 times. The closest the paper comes to acknowledging a relationship between productivity and reducing the hours of work is to (rather ambiguously) suggest, in a discussion that begins at the bottom of page 7 and continues to the top of page 8, that an increase in the hours of work (or one of several other factors mentioned) “may improve labour productivity growth levels for a [limited] period of time.” Now this happens to be entirely wrong not only in terms of economic theory (see below) but also in terms of grade-three arithmetic.
It is not an eccentricity of the Work Less Party to suggest a correlation between reducing the hours of work and increasing productivity. Last May, in his presentation to the Senate Standing Committee on Banking, Trade and Commerce, Andrew Sharpe included the reduction of working time as one of six policies for improving productivity growth in Canada. He pointed out that:
A
person who works 35 hours a week rather than 40 tends to be more productive on
an hourly basis. The worker will be less tired, and more focused as the more
limited time available for work will be used more effectively. For example,
less time will be wasted on meetings. One of the effects of the 35 hour work
week legislation in France (which has recently been modified) has been to
increase productivity, even though the purpose of the initiative was to
increase employment.
Perhaps this seems too intuitively obvious to be trusted by the Progress Board’s adepts. Economics is, as we all know, complicated. But the economic theory backs up Sharpe’s common-sense explanation. In its submission to the Australian Industrial Relations Commission on the Reasonable Hours test case, the government of the state of Queensland summarized the economic analysis of the impact of longer hours of work on productivity. We have included relevant sections from that submission (which incidentally draws heavily on the work of the Work Less Party’s Policy Coordinator, Tom Walker) in Appendix B.
In a nutshell, economist S. J. Chapman argued that reduction of the hours of work could enable workers to produce as much or more in fewer hours (the very definition of a productivity increase!). But he also cautioned that both employers and workers could be driven by competitive pressure to accept hours of work that were longer than optimal from the standpoint of either output or worker well-being.
The Work Less Party would like to see a much broader discussion about productivity than is envisioned in the BC Progress Board’s discussion paper. Productivity is indeed “very important” as the Progress Board claims. However, Andrew Sharpe presciently replied to that claim last May when he observed, “Productivity is certainly important, but it is not everything.” Sharpe went on to argue that “economic well-being and quality of life are higher level concepts that trump productivity.”
What could be more important than “boosting incomes?” UBC economist John Helliwell told an Imagine BC dialogue session in March that beyond a certain level of sufficiency, more income doesn’t bring people greater happiness. What most adds to happiness, according to Helliwell, is trust. And trust takes time to develop; it can’t be bought. Furthermore, economists Peter Victor of York University and Gideon Rosenbluth of UBC have developed an economic model, “Managing without Growth”, that shows it is feasible to reduce unemployment, reduce poverty and reduce greenhouse gas emissions in an economy with low or no growth. A key element of such a miracle would be the reduction of working time. Finally, UBC ecological economist William Rees has called attention to the very large ecological footprint that Canadians implant on the earth "Our economic system has made a secular religion out of growth and our god is technology. But if you take the footprint stuff seriously then you have to do something serious to reduce consumption, to change our lifestyle."
So, what could be more important than boosting incomes? Building trust. A more equitable distribution of incomes. Stepping more lightly on the earth. Increased productivity can indeed contribute to those good things. But it can only help if people intelligently consider the questions: production of what?, for what purpose? and for whose benefit?
In its discussion paper on productivity the BC Progress Board side steps those fundamental questions. Words besides “leisure” that don’t occur at all in the paper are “footprint,” “poverty” and “greenhouse gas.” “Income” appears 62 times in the paper and “growth” 185 times but there is no mention of “security,” “trust” or “happiness.” “Well-being” appears only once – in the bibliography. “Unemployment” makes its lone cameo appearance to highlight a current 30-year low. Perhaps most marvellous is the contrast between “innovation” and “imagination.” “Innovation” appears in the paper 35 times but neither “imagine” nor “imagination” are there. What kind of innovation is it that thrives in the absence of imagination? Sometimes what is left unsaid is more revealing that what has been said.
The Work Less Party invites the members of the BC Progress Board to imagine productivity that improves the quality of life rather than single-minded productivity that only increases the quantity of income. There is a difference. The failure to notice that difference – and to act on it – is at the root of our society’s most worrisome problems today. We look forward to a response from the BC Progress Board to the issues we have raised and we call on the citizens of British Columbia to also join in this dialogue.