Why workers need to know about the ‘productivity’ problem

The top CEOs in Australia are paid at more than a hundred times the rate of the average worker.  

Only yesterday we saw Commonwealth Bank CEO Matt Comyn warn of a mythical ‘wage-price spiral’ should businesses increase wages to keep up with inflation. It was a strange argument to be making when he had pocketed a 35 per cent increase to his own pay: from $5.17 million to $6.97 million. Is Matt Comyn really 9,800 percent more productive than the average Commbank worker? 

To add insult to injury, we are seeing insecure work flourish in this environment – meaning workers have little to no guarantee of a steady income. When CEOs are challenged on this inequality, they promise workers will receive pay rises when companies have productivity improvements to afford them. And yet when they can afford it, these same CEOs refuse to implement wage increases.  

What is ‘productivity’?

We’re all familiar with the broad concept of productivity. If we say “I’ve had a productive day” it means we have made efficient use of our time to get things done. 

In economics, the common definition of productivity is the amount of a good or service a person produces during a certain unit of time (e.g. per hour, per year). When an individual increases the amount they produce in the same amount of time, that means their productivity has improved.  

That can mean a farmer produces even more wheat in one year than the next. Or a warehouse worker collects more boxes off the shelves in an hour than they did during the previous one.  

But it helps to be wary of when the term is used in a workplace context.  

CEOs and senior executives often use productivity to refer to the idea that we need minimal resources to produce maximum output.  

It’s all about what they can squeeze out of their workers, hiring as few workers as possible for as low as possible to produce as much as possible, or one worker doing the job that two workers used to do.  

So, what’s the problem with ‘productivity’?

Firstly, when talking about productivity we need to be measuring the right things. Assigning more students to one teacher or more patients to one nurse isn’t helping going to increase productivity, for example.  

Increasing the workload for a single employee to an unsustainable level will seldom amount to true productivity. This approach fails in that it overlooks the quality of the product itself, favouring the numbers instead.  

The other problem is that improvement in productivity is no guarantee that wages will improve too. Australian productivity has been growing steadily, with your average worker producing over twice the output per hour than what is reflected in their wages.  

But wage growth is falling far behind productivity growth, with productivity growing 13 per cent in the last decade and wages growing only one per cent. Improved productivity does not automatically guarantee wages will rise appropriately. We need to first ensure that workers are able to bargain to win their fair share of the economic pie they are helping to create.  

In short, ‘productivity’ is economic jargon that can be misused to obscure the facts, for the benefit of multi-millionaire CEOs. It’s simply a fancy economic term that means you need to work harder and faster but still get paid the same.  

How do we solve the ‘productivity’ problem?

It’s so often forgotten that workers are the backbone of the economy, so it only makes sense that profits should be shared fairly among the workers who produce them. 

There are lots of ideas that unions are calling for that will improve productivity.  

We want to rebuild our skills system, make it easier for disadvantaged groups to get into the workforce if they chose to, invest in becoming a renewable energy superpower, and to help lift Australia’s poor levels of innovation.

All would boost productivity without necessarily requiring workers to work harder. But we also need to guarantee that workers get a fair share.  

To fix that we need a national economic policy that takes a broader and fairer view than just the corporate CEO vision of ‘productivity’. Australia needs to establish more secure and fairly compensated jobs for its workers.  

We need policies that protect workers from the cost-of-living burden, providing secure incomes addressing the real systemic causes for inflation at the root.  

Workers in unions are already on the front foot, standing up for better wages and conditions at their workplaces while CEOs and senior executives rake in millions.  

If you want to see change, together, we can take action to drive that change. That means better wages than non-union members, the workplace conditions you deserve and support standing by if anything goes wrong.