A responce to IP

In the comments section of my previous post about the connection between Collective Bargaining Coverage, and Labour productivity growth the famed "Insolent Prick" had the following to say ...

"What your post shows is no correlation, whatsoever, between union coverage and labour productivity. Unless you choose to highlight a couple of examples, and ignore the rest of your data. Which isn't a pattern at all."

This made me think, well a simple scatter graph could solve this. So I whacked the two data sets into excel, and this was the result .....




In addition, I calculated the Average Annual Labour productivity growth for those countries with a collective bargaining coverage figure of below 40% and above 60%. The respective averages were 1.7% and 2%. So there's certainly a significant pattern, if not a drastically pronounced one.

I will say however that calculating any statistical significance is nigh on impossible because of the numerous other factors that would need to be included and accounted for. As such these findings should be taken as indicative evidence rather than concrete proof of any correlation between collective bargaining coverage and labour productivity growth.

Labour Productivity and Collective Bargaining Coverage. Noticing a pattern?

Why New Zealand needs its unions back: #5 - Labour Productivity

This has given incentive to employers to source increased output from labour rather than machines. Consequently New Zealand's comparitively lower rate of wage growth has lead to labour being much cheaper relative to capital than is the case in Australia.

(Source: Hall and Scobie, 2005: 20)

This has lead to a stagnation in the ratio of capital to labour (in terms of thier dollar value) within New Zealand's economy.

(Source: Black et al., 2003: 24)

This has obvious implications for New Zeland's labour productivity (output measured in $ per labour hour) growth as greater capital investment leads to greater efficiency and output. Hall and Scobie (2005: 32). estimate that 70 percent of the difference in labour productivity growth between New Zealand and Australia from 1995 to 2002 could be accounted for by New Zealand’s comparatively lower capital intensity (capital value/hours worked) growth rate. So because of this slow wage growth and concomitanat stagnation of capital intensity New Zealand’s labour productivity has fallen from being 85 percent of Australia’s in 1987 to 79 percent in 2003 (Parham and Roberts, 2004: 4). Labour productivity growth is extremely important as any growth in wages that isn't matched by growth in productivity leads to inflation (inflation 'eats up' what is gained in wage increases. Or as Dalziel and Lattimore point out, the most important source of sustained improvement in a country’s standard of living is growth in the productivity of its employed labour force (1996: 61). For these reasons the issue of labour productivity is extremely important.

Why New Zealand needs its unions back #4

Over at DPF's blog a commentator has objected to the findings of the research that I've presented on this blog, claiming that ...

"No doubt you will say that the decline in wages as a percentage of GDP has come at the expense of workers (and this is a global phenomena not just NZ)"

http://www.kiwiblog.co.nz/2007/08/the_peoples_mayor.html#comment-328380

Well, ok I say. Let's do a little comparison Australia to see how well this assertion stands up in reality.

In contrast to New Zealand, Australia had, until recently, retained it’s centralised bargaining regime and has kept its minimum wage amongst the highest in the world (NZERI, 2006: 29). Indeed, in 2004 80 percent of Australia’s workforce was protected in terms of base pay and conditions at least by multi-employer Awards and Industrial Tribunals (Wilson, 2004: 182). Consequently Australian workers have benefited more from the economic growth that has occurred since the early 1990s.












So, wage growth from 1991-2004 in Australian was robust at an average of 3.35 percent (0.6 percent higher than in New Zealand) while GDP growth was 0.2 percent higher than New Zealand’s averaging 3.7 percent annually. So during this period annual average weekly wage growth was 90 percent of average annual GDP growth (21 percent higher than New Zealand’s comparable figure) (Economagic, 2006 and OECD, 2006). Consequently labour income share (percentage of GDP paid out as wages) has remained steady at around 53 percent from 1991 to 2002 (Parham and Roberts 2005: 5).