Transcript No Slide Title

Productivity – labour, education
and skills
NatStats 2010
Phillip Chindamo
Chief Economist
Australian Industry Group
Sydney
16 September 2010
Key messages
• Productivity remains the most important of the three Ps
• Australia’s recent productivity performance has been
patchy
• Investment in ‘human capital’ is critical to enhance
productivity
• Need to address existing workforce skills gaps and skills
shortages
• Policy priorities also include better targeted funding
• Better statistical information can help assess progress and
inform policy decisions
Economic benefits: Australian estimates
• Private returns (earnings)
– Approx 15% average return to investment in bachelor
degrees
– Significant returns to high school education
• Economy-wide returns (growth, productivity)
– Lab productivity elasticity: 0.10 w.r.t. tertiary education
– 1.1% higher annual GDP in long-run
• Consensus view: returns are significant even though
estimates vary significantly
Human capital and productivity
Australia
Source: Daron Acemoglu, MIT
First among equals: productivity in the 3Ps
Source: IGR 2010,
Commonwealth Treasury
19
75
19 /76
76
19 /77
77
19 /78
78
19 /79
79
19 /80
80
19 /81
81
19 /82
82
19 /83
83
19 /84
84
19 /85
85
19 /86
86
19 /87
87
19 /88
88
19 /89
89
19 /90
90
19 /91
91
19 /92
92
19 /93
93
19 /94
94
19 /95
95
19 /96
96
19 /97
97
19 /98
98
19 /99
99
20 /00
00
20 /01
01
20 /02
02
20 /03
03
20 /04
04
20 /05
05
20 /06
06
20 /07
07
20 /08
08
20 /09
09
/1
0
Index = 100 in 1975-76
200.0
180.0
160.0
2
Source: ABS data
120.0
100.0
0.0
1.5
80.0
60.0
1
40.0
0.5
20.0
0
Average annual growth (%)
Australia’s patchy labour productivity
3
Labour productivity growth (RHS)
Labour productivity: real GDP per hour worked
Average annual growth (RHS)
2.5
140.0
Existing workforce skills need attention
• National Workforce Literacy Project
• Key findings:
– Low levels of literacy and numeracy negatively
impacting on workplace productivity
– Capacity to address literacy and numeracy most
difficult for small businesses
– Many different measures can help address workforce
skills needs
– Bottom line: productivity growth will stagnate further if
this is not addressed
percentage of respondents
Skills shortages also risk growth
60
49.7
50
37.4
40
28.9
30
15.7
20
10
42.3
5.8
10.1
10.1
0
Extreme risk
2010
Source: Australian Industry
Group
High risk
Moderate risk
2015
Low risk
Policy priorities for education and skills
• Increasing real levels of funding in VET
• Additional funding for demand-driven models
• Linking eligibility for public funds to quality performance
• Developing, funding and implementing a National Adult
Language, Literacy & Numeracy (LLN) strategy
• Ongoing funding for the Apprenticeship Kickstart bonus
for apprentices in traditional trades
• More and better statistical information on education and
skills
Statistical information priorities
• Further ABS work on measure of ‘human capital’ stock
– Ideally time series allowing growth accounting
decompositions
• Further ABS work on quality adjusted labour inputs to
productivity estimates
• Need for annual survey examining employers’ training and
recruitment practices and skills needs
– Include employer expenditure on skills training
• Detail on course and module completion rates in the VET
sector by individual providers
– Important for accountability, quality and transparency
www.aigroup.com.au/economics