The widespread assumption that boosting productivity will naturally flow through to living standards has been debunked by a new report from the McKell Institute, with analysis showing that Australia's retail workers have delivered a 26 per cent boost in productivity only to see their wages go backwards in real terms. The report, which was commissioned by the Shop, Distributive & Allied Employees' Association (SDA) finds: - Since 2007, worker productivity has grown by 26 per cent in the retail sector but real wages have fallen by over one per cent, representing a 'productivity debt' in retail of 27 per cent. - Productivity growth in the retail sector has outpaced the average of all industries over this period, but real wages growth has underperformed. - In real terms, the average total annual earnings for retail workers has fallen by $400 since 2007. Over this same period, profits in the industry have increased by $22 billion in real terms. In response to the findings the report recommends the government: 1. Establish a formal 'productivity dividend', which would ensure a proportion of productivity gains are directed toward workers (via wage wises and increased leave entitlements or shorter working hours) 2. Establish mandatory 'productivity debt' reporting by large firms "It's correct to say that Australia needs to improve its productivity, but it's incorrect to claim that this will necessarily do anything to directly benefit the average person," said McKell Institute chief executive Edward Cavanough. "Productivity is important. But Australia doesn't yet have the policy architecture in place that ensures productivity gains flow through to workers' living standards. "But if the government wants to make sure the benefit flows to workers and not just shareholders there are plenty of options to consider. For example, it could mandate that larger companies report productivity and profit share to calculate their 'productivity debt.' Much like gender pay gap reporting, this information could be provided to the government. "It might also consider the establishment of a 'productivity dividend' mechanism which would require firms to guarantee a proportion of productivity gains flow through to their workforce. These productivity gains should be delivered in the form of wage increases, or through worker benefits, like additional leave allocations or shorter working hours." SDA National Secretary Gerard Dwyer said retail workers were proof that without better laws workers could not be guaranteed a fair share of productivity gains. "There's not much point boosting productivity if it doesn't improve the lives of normal people," Mr Dwyer said. "Retail workers have delivered more productivity growth than most sectors and yet that benefit has not flowed through. "The tale of the Australian retail sector over the past two decades should serve as a huge warning to the Government. In this sector workers have provided their employers with a massive increase in productivity that has created a massive boost to profits. And in return they've received diddly-squat."
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Full report: https://mckellinstitute.org.au/research/reports/achieving-the-productivity-promise/
