My Op-ed on productivity in today’s Canberra Times

Longer hours means lower productivity for the public service

Originally published in The Canberra Times

Date: May 6, 2014

Warwick Smith

Job security in the public service is declining and conditions are under assault. Job security in the public service is declining and conditions are under assault.

Recently we’ve heard the federal government discussing the possibility of increasing the number of hours a week worked by public servants (“Public servants face longer working hours to boost productivity”,, April 19).

So, will making public servants work longer hours improve productivity? In short, no.

Economic and business commentators regularly bemoan Australia’s low productivity growth and suggest that lifting productivity is the answer to many of our problems. These commentators never ask the most important question: productivity of what, for what? What is it that we want to use more efficiently? The unspoken answer in public discourse in Australia is labour.

Labour productivity is traditionally measured as output per hour worked. Making people work more hours does not increase labour productivity. In fact, it almost always reduces average labour productivity because the extra hours are less productive.

Perhaps then the aim is to increase capital productivity (getting more work done for each taxpayer dollar spent). It seems plausible, on the face of it, that you might be able to wring a bit more work out of each employee by insisting on longer working hours, even if those extra hours are less productive. However, in the Swedish city of Gothenburg, trials are under way to reduce public service working hours in the name of greater productivity. They believe that by reducing the working day to six hours they will increase productivity during those six hours, reduce sick leave and create an overall more healthy and productive workplace. The contrast with the attitude here couldn’t be greater.

In Australia there has historically been an explicitly acknowledged trade-off for white-collar workers between the higher pay, tougher working conditions of the private sector and lower pay, better working conditions of the public sector. Good working conditions and job security have been among the most powerful factors that attract quality candidates to many public sector jobs. Job security in the public service is declining and conditions are under assault. This means the public service will have to pay higher wages or they will attract lower quality candidates. In other words, increasing public service working hours in the name of productivity is a self-defeating initiative.

Additionally, this initiative fails to acknowledge that many public servants already work longer hours than mandated by their contracts, particularly those in higher-level positions. Many of these public servants will meet the longer working hour requirements without doing anything different, thus producing no extra output. The impact, therefore, of instituting longer working hours will largely fall on the lower-income earners and those working in government shop-fronts and the like.

This push to lengthen working hours also ignores the lessons of economic history. Productivity improvements do not largely come from industrial relations changes, but from technological and cultural innovation and increased human capital.

If the federal government is serious about increasing productivity, both within the public service and in the broader Australian economy, it must take a longer view than the next election and pour money into research and education. The evidence tells us that such investments will pay for themselves in the long term.

As part of this there should be an injection of new funding in the CSIRO, as it has a fantastic record of producing practical innovations that have increased productivity not just in Australia, but around the world. The Australian Research Council and the National Health and Medical Research Council should similarly be expanded with substantial increases in research grants. Such grants should be untied and, subject to appropriate ethics review, simply provide the best researchers with money to do what they want to do. This is a proven method for creating genuine innovation – as opposed to research priorities dictated by bureaucratic or political preferences.

The proposals we’ve seen to further privatise universities and release them from fee constraints and the like must be resisted. It’s true that such moves might create a few better elite universities that are largely attended by the sons and daughters of Australia’s wealthiest families, but this would come at the cost of all of the rest of the university sector and the overwhelming majority of students and researchers. Entrance to our top universities should be merit based, not wealth based. This is not just a social justice issue but is also an efficiency issue. We don’t want it to be our wealthiest students who get the best education; we want it to be our best-qualified students.

We’d do well to think very carefully about the Swedish example mentioned earlier. Despite what economists’ models say, people are not like other resources and they need to be treated differently. The purpose of society is not to get better bang for your buck; it’s to create an environment in which people thrive. We should aim for smart, happy and healthy workplaces where people produce a lot during the time they are at work, rather than increasing their hours in a short-sighted attempt to squeeze as much out of each individual as we can.

Warwick Smith is a research economist at the University of Melbourne

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