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New Zealand ranks low compared to other developed countries when it comes to productivity.
The most recent research from Motu Economic and Public Policy Research Trust looks at whether New Zealand firms in large cities are more productive than those in smaller urban areas.
“After accounting for the fact that highly productive industries are over-represented in Auckland, Auckland firms produce 13.5 percent more goods and services with the same labour than firms in other urban areas, and 11.3 percent more than firms in rural areas,” said Dave Maré, Senior Fellow at Motu.
This measurement is known as labour productivity and it varies between urban areas. For example, Wellington firms have relatively high average labour productivity, with levels that are 4.2 percent lower than Auckland. For other urban areas, the gap ranges from 9.4 percent to 20.1 percent.
“Auckland firms produce 2 to 6 percent more with the same inputs than firms in other urban areas,” said Dr Maré. “Wellington is an exception in this ‘multi-factor productivity’ measurement, with Wellington firms having multi-factor productivity that is 2.7 percent higher than that of comparable Auckland firms.”
The reasons for Auckland firms’ productivity premium include that Auckland firms disproportionately employ workers who would be more productive anywhere.
“Reflecting the higher average skills of workers in Auckland, firms there pay 12.1 percent more per employee than do firms in other urban areas. Labour prices are only slightly lower in Wellington,” said Dr Maré.
In exporting industries there is a smaller productivity difference between Auckland and other urban firms.
“However, the auxiliary finance and insurance sector in Auckland is 41 percent more productive than in other urban areas in New Zealand. Information media services and non-metallic mineral product manufacturing firms are also more than 30 percent more productive in Auckland than in other urban areas,” said Dr Maré.
The research was compiled using information on 80,000 firms per year over 12 years (2001-1012), which account for over 60 percent of national output in the selected industries, and around 75 percent of employment.
The independent report Urban Productivity Estimation with Heterogeneous Prices and Labour by David C Maré was funded by the New Zealand Productivity Hub, under the Productivity Partnership programme, and also by Te Punaha Matatini, a Centre of Research Excellence hosted by the University of Auckland, whose mission is to develop methods and tools for transforming complex data into knowledge.
| Labour productivity in relation to Auckland |
Multi-Factor Productivity in relation to Auckland |
|
| Wellington | -4.2% | +2.7% |
| Christchurch | -12.1% | -1.8% |
| Hamilton | -13.1% | -2.9% |
| Tauranga | -9.4% | -4.8% |
| Napier | -12.4% | -2.2% |
| Dunedin | -18.3% | -3.2% |
| Other main urban areas | -16.0% | -2.0% |
| Other secondary urban areas | -14.6% | -1.2% |
| Other minor urban areas | -20.1% | -6.4% |
| Rural | -11.3% | -13.5% |
Motu Economic and Public Policy Research is an independent research institute operating as a charitable trust.
It is the top-ranked economics organisation in New Zealand, according to the Research Papers in Economics (RePEc) website, which ranks all economists and economic research organisations in the world based on the quantity and quality of their research publications. According to RePEc, Motu has five of the top 25 individual researchers in New Zealand.
23 Comments
When saying that Auckland is the most productive, does it take into account that people in Auckland probably work the longest hours on average?
Just as a hypothetical example, I might produce 10% more working here in Auckland, but I might also work 15% more hours than someone in Wellington or Christchurch. Then, I'd be less productive than the worker in Christchurch or Wellington.
Refer; "After accounting for the fact that highly productive industries are over-represented in Auckland, Auckland firms produce 13.5 percent more goods and services with the same labour than firms in other urban areas, and 11.3 percent more than firms in rural areas"
The fact that they work the longest hours is irrelevant as it is production weighted against a benchmark labour unit.
You could however argue that an adjustment needs to be made for commuting times, though.
How much of this very productive output is useful. Does it just this mean that Auckland are quite efficient at shuffling money, making cappuccinos or moving imports through warehouses. How do you meaningfully compare the productivity of farmers and meat workers in Southland with office workers and warehouse store men in Auckland.
Refer; "After accounting for the fact that highly productive industries are over-represented in Auckland, Auckland firms produce 13.5 percent more goods and services with the same labour than firms in other urban areas, and 11.3 percent more than firms in rural areas"
What was that bit of research, published here on interest.co which said that Auckland tended more to use people within larger systems ? It said Auckland attracted people suited to be a unit within corporates (rats on the treadmill !) or in well prescribed jobs. And other places suited people who were entrepreneurial, mobile thinkers and developers of new business.
I'd believe these figures and the dismal result for Dunedin, which is dominated by the City Council, the Health Board and the University. All of which are 'oh dear' and unconnected to the idea of productivity. Fortunately the smaller entrepreneurial class thrives there, despite those millstones.
GDP per capita is higher in Taranaki and Wellington regions and the Naki's net contribution to export is hugely positive. If we were nationally to achieve their level of contribution to the economy we would be one of the wealthiest nations on earth and run huge current account surpluses - the Norway of the South! Of course we can forget about that now with high immigration the dismal net performance of our cities putting us well into negative territory.
Our relative size means we are more competitive than places that are much smaller.
However there are a few tiny problems for Auckland - problems called Sydney, Melbourne, Perth and Brisbane. Every year for the last 6 years these places have found the time to build new office space and homes much faster than Auckland. So every year we become less competitive in terms of living and office costs.
"The reasons for Auckland firms’ productivity premium include that Auckland firms disproportionately employ workers who would be more productive anywhere."
Yes, I always thought that an Auckland real Estate person was always more productive than an agent from elsewhere and had nothing to do with the housing market.
If you use revenue as your output measure then insurance is always going to throw up higher per capita 'productivity' in AKL due to most large dollar corporate accounts being brokered and underwritten there - monstrous premiums transacted by a comparatively small number of people.
Yes, how can you compare production based solely on $ value? Add it up; the Auckland based finance and real estate sector (a parasitic looting operation), head office operations with executives on outrageous salaries (what exactly does Fonterra HQ actually produce) a massive parasitic central and local government sector and a dismal export performance. Parasites or producers?
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