New Zealanders work longer hours but have low productivity levels when compared with other workers in other developed nations. According to report from the Productivity Commission, the output of New Zealand workers is a fifth less than their counterparts in other countries.
The Productivity Commission has also cited that New Zealand's productivity levels might not improve as it found little evidence of positive change.
Based on the report, 15 per cent of New Zealanders put in more time for work than other members of the Organisation for Economic Cooperation and Development. Kiwis produce 20 per cent less output for every hour of work.
The Productivity Commission's report has suggested that theoretically, low-productive economies usually catch up to countries on the forefront as the latest technologies, ideas and capital flow across countries. However, the commission said this has not been the case for New Zealand.
The commission said that at the aggregate level, the productivity performance of Kiwis did not show any sign of catching up with other economies in the forefront for many years. The report also said that since the 1980s, labour productivity in New Zealand remains to be one of the lowest in the world.
The Productivity Commission report did not contain any recommendations about how to increase New Zealand's productivity, but it was meant to "set the backdrop" for what the commission needs to do. The Productivity Commission aims to address the causes that affect Kiwi work performance.
Data from the 1990s showed that New Zealand's labour productivity growth accounts for half of the country's average income growth. Growth in labour productivity will have to be increased from now on based on the natural limit of the Kiwi population's labour participation.
As the New Zealand population ages, increasing average incomes when raising labour productivity becomes a daunting task, according to the report of the Productivity Commission.
The growing gap in labour productivity is the main reason behind the huge difference between the GDP per capita of Australia and New Zealand.
The report also said that out of 10 industries reflecting New Zealand's productivity levels, only three had caught up with Australia or narrowed the gap. These industries that showed signs of improvement were manufacturing, information media and telecommunication.
The low productivity levels raise some serious concerns of foreign companies looking at New Zealand to offshore their services.
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