Posts by Matthew Poole
Last ←Newer Page 1 2 3 4 5 Older→ First
-
Fletcher, that's a 40% increase over a period of 11 years. In my book, a mean increase of less than 4% per year equates to "not very much". If it had been a 40% increase over even five years that'd be something to talk about, but it's over more than a decade. It also compares to a 2002 average for the OECD of 2.26%, which is the latest figure I could find in a hurry. So we're about 1/3 behind the OECD average, if not more given how many articles I've seen in my Googling that talk about countries throwing large extra sums at their R&D efforts.
-
That means software, creative, hi-tech and professional services industries, not dairy and meat. There are a few things that help with that - oh, like R&D credits.
Let 'nerds' drive us all into future
Out of curiosity, I went and looked for figures on NZ's current R&D spend as a percentage of GDP. According to the article that DeepRed linked to, in 1997 it was 1.1%. For 2008, based on a GDP of NZD 135.7b and R&D spend of NZD 2.14b, I get a figure of 1.57%. Someone want to check my numbers? If that's accurate, and certainly the data sources are credible, then we've not done very much to progress the transition to some kind of balance in the sources of income. That's got to be bad for overall productivity, no matter how much money business is investing on capital goods. Also, as a side note, a document on the Stats NZ website that I now can't find again showed a decrease in return on capital balance over the last financial year. Not much of one, but still a decrease.
-
Firstly, I don't know if you noticed but I ain't making this a 'Labour bad/National good' argument. Partisan face-pulling tends to make things less rather than more clear, as well as being a bit of a bore.
Yes, I didn't phrase it terribly well. It was more a general observation than something aimed at any of the contributors here. Labour's been getting an awful lot of flak from a lot of places for the lack of movement on productivity, but I don't see how they could've done very much more to encourage changes. Other than, obviously, discouraging primary production and instead moving to "soft" products as Stephen suggests.
If there is any change there tends to be a lag before it shows up in any statitistics - I was told why, once, but the subtleties eluded me then and still do.
Well, stats do tend to be a year or so behind current, so that's one issue. There's also the lag, as Stephen says, between installing improved kit and getting maximum return, unless it's something that's fully automated and can run at maximum capacity entirely of its own volition. Regardless, 2004/2005 is now four years in the past. We should've seen something by now, and we haven't. Our productivity has remained stagnant for the entire period. Allowing for all kinds of delays in RoI and reporting and all the rest, four years should be showing something. It's not.
Thirdly, we actually don't have a particularly literate or numerate workforce.
Since there's been a dearth of evidence from either side of this thread about this, I went looking. Turns out we're upper-third of the OECD for "prose literacy" but that's the best we do. We're in the lower half for "document literacy" and "quantitative literacy", according to the International Adult Literacy Survey (IALS). The caveat is that the data on which that's based is now between 12 and 16 years old, and we've implemented programmes in the intervening period to try and improve those metrics in the adult workforce. There hasn't been a repeat of the IALS that I could find, so we're stuck with data that's very old. Accepting that we have a lot of functionally-illiterate/innumerate workers, that survey also positions us quite close to the US, UK and Australia in all three categories. So we're not in a particularly disparate place against the usual comparison nations, or weren't 13 years ago, and that brings us back in a circle of asking why productivity is so much lower here than in countries that have similar workforce literacy/numeracy characteristics.
It's interesting that "educated" literacy doesn't add up to functional literacy. The Wikipedia article on literacy in the US has some pretty startling facts about literature engagement post education (see in the citations section). I wonder what the figures are here, and wouldn't be surprised if they're fairly similar. We're not quite the TV culture that the US is, but not too far off.
-
Rob, accepting that things have changed somewhat, it still doesn't explain why we're going absolutely nowhere on productivity. Much as National love to blame Labour for "squandering their nine years of power", I just don't see what more could've been done on the government side. We've got a highly literate workforce by international standards, even by the standards of our "competitors", and it's not like our tax system is in the least unusual in its treatment of capital purchases. Hell, Labour even brought in an R&D tax credit, which is more than National can claim.
Unless I've missed something fundamental, the productivity issue is with choices made by business, not with the government. Or are National meaning that Labour made it too attractive to be in primary production, at the expense of high-tech, low-footprint production? No, I don't actually think that's what they mean, but it's the only failing I can pinpoint.
-
Yeah, but the MPS figures I was referring to usually strip out the computer investment from their business investment stats.
Never asked them why, and perhaps I should have. But it always struck me as an implicit vote of no confidence in the productivity benefits of IT.
Interesting. I wonder why the sudden up-tick in investment, then, because ordinarily a 20% increase doesn't just disappear with no visible trace.
As for the productivity of IT, I'm not in the least surprised. With very few exceptions, IT doesn't of itself make a business more productive. Obviously if you go from, say, a manual lathe to a computer-controlled one you'll probably see increased productivity, but if you upgrade the A/R clerk from paper to MYOB your business's output isn't changing at all. That lathe isn't strictly-speaking an IT upgrade, either, since you've almost certainly had to replace the entire machine in order to bring in the IT component, so it's a plant upgrade not just an IT upgrade.
-
Rich, point taken about computers in general being a productivity enhancer, at least to a point. After all, it's a bit hard to surf for porn on your manual typewriter. But once that benefit's reaped it's only very, very slight increments to invest in new computer equipment. The initial investment in IT was staggered across industries over time, so there was no bubble. However, by the time XP came out everyone was using IT and there was now a large market that was ready (and easily convinced) to upgrade. Hence, bubble. The productivity and efficiency gains will be mostly unnoticed, though companies that are still existing in the dark ages will get a big boost.
Anecdotal example here: my flatmate's a consulting engineer, specialising in HVAC. His employer is a small (I think it's about four engineers, including him, plus two or three ancillary staff such as a draughtsman) partnership, and until late last year they were running on computers that had as their most up-to-date model a Pentium 2. The network was 10Mb/s ethernet. It took 10 minutes to open up AutoCAD, and as long again to open up some of the larger project files. It was at the point where he used his own laptop just so that he could get something resembling responsiveness from AutoCAD. That's a ridiculous drain on productivity, with all the lost time to slow computers. They finally upgraded their entire IT infrastructure last year, with new workstations, servers, and network infrastructure. He's estimating about an extra hour of productive time per day, just for him, as a result. That's a big deal, but it took years before his boss could be persuaded to spend what was, relatively speaking, a fairly small sum. I don't know what the consultants charged (they hired a specialist consultancy that does IT systems for engineering firms), but the hardware cost left change from $20k. They should make that back in a year, but it will be a long time before the firm recoups the huge sums that were lost before the upgrade.
-
Stephen, that's very interesting. So the feeling that we under-invest in capital means of production is just that, a feeling, and not something borne out by the evidence, but we're still a very under-performing economy. Which doesn't make a heck of a lot of sense.
I wonder what the figures would look like if they were adjusted to factor out the very capital-intensive nature of dairy farming. As in the farms themselves, not Fonterra's massive and highly-advanced processing facilities. Building and upgrading milking sheds costs a heck of a lot of money, but the productivity is only minimally variable without going to an entirely new format - such as going from herringbone to rotary. I see the "next big thing" as the fully-automated dairy shed that's been worked through in Otago (I think the farmers that came up with it are in Otago), and that'll be another step up in productivity but is still tying the investment into primary production. -
I can point you to numerous monetary policy statements from the Reserve Bank over the middle of the decade which noted the comparativley high level of business investment - around 20% above trend in '04-05.
Which was right around the time that businesses started going through the upgrade process to get their offices running XP. That frequently involved buying new computers, and often meant a full upgrade of the entire IT infrastructure to go to Windows 2K3 and an AD structure. IT consultants are cunning buggers, and it's not hard to baffle the average medium-size business operator with a whole lot of BS about why they should be using Active Directory and all the rest. And even small businesses were pretty much forced to upgrade by the emergence of Office 2K3, requiring improved hardware just to get it to open in less time than it took to boil the jug and make your morning cuppa. We'll see a similar capital spending up-tick in the next couple of years as companies that've let Vista pass them by upgrade to go to Windows 7.
Hate to break it to you, but upgrading your computers so that you can maintain electronic communication with the rest of society isn't an investment in the capital means of production. -
And it would still circumvent the politically suicidal capital gains tax.
It's a shame that Labour couldn't have sucked it up, accepted its impending doom, and passed a capital gains tax in its dying days. That would've been the greatest legacy Cullen could've left us. Instead we're stuck with an freshly-elected government that's going to do its utmost to cling to power for as long as possible, ensuring that capital gains won't happen for several more years. If ever. It's dangerous to even admit considering such a thing, never mind actually implementing it, and that's going to keep us fucked for a long time to come.
-
I'm not sure this isn't a bit misunderstood, even by those in the know. People mostly look at productivity as like-for-like, whether an F&P plant here makes more washing machines than one in China. But in fact it's as much about what people are doing as how they are doing it.
Rich, isn't that something that's adjusted for by economists, using measures such as GDP/GNP per-capita and the like? Certainly I don't think productivity is just about how many washing machines we can make, the appearance of my question above notwithstanding. Manufacturing is a higher-level output than primary produce, though, so one way to improve productivity is to keep manufacturing in-country rather than outsourcing everything as quickly as possible. The best outcome, as you say, is to get into the high-tech, low-footprint industries around software and other "soft" exports. We have some pharmaceutical R&D here, but after seeing this I'm not so sure that we really want to get ourselves too closely aligned with Big Pharma.