Productivity Flashcards
naaar phillis
Productivity
Productivity is the practice of producing more output for the same or less of an input
Stat about productivity in the last 30 years
Has doubled but has become stagnant in the last 10 years
Working hours and productivity
Not about working longer hours, rather it is about making the most of the resources we have available
When does productivity grow
When we can produce more outputs for the same or fewer inputs
Measured sense of growth of productivity
Represents growth in outputs over growth of inputs
Equation for productivity
Output volume/input volume
2 ways to demonstrate productivity
ad/as and APF
5 positives of productivity growth
Efficiency
Supports consumption
Economic goals
Environment
International Competitiveness
Efficiency benefit
Improvement in the efficiency of resource use over time
Economic goals
Impacts positively on all economic goals eg,fe,resource allocation etc
Environment
If output can increase for less imports then living standards can rise without eroding the quality of the environment
International competiveness
Means we can sell exports and compete against imports
Productivity and income growth
In the medium to long run, the growth of real income depends largely on productivity growth
eg of effect on income growth
pg had a period of strong growth in 1990’s thus high income growth
Why did incomes still grow when PG fell stagnant in 2000s
The effect of a decline in PG was offest by the boost in incomes from the rise in Terms of trade over the past decade
Single factor productivity
Is a ratio of output to inputs of labour when there is only one input in the denominator
2 ways to calculate sfp
GDP/Labour Hours and by capital deepening + MFP
Capital productivity
is the ratio of output to capital input
measuring Capital productivity
Output/ how long capital is used for
Multifactor productivity
measures the efficiency of which capital and labour are combined to create output
Calculating MFP
GDP/ labour hours + capital inputs
What does MFP represent
The part of growth in output that cant be explained by growth in labour or capital inputs
What changes does MFP reflect
Technological change and management ability
management ability
Their ability to
Combine labour and capital
Innovate
Introduce trainig
Motivate workers
Capital deepening
Is defined as growth in the ratio of quantities capital to labor
Capital deepening formula
Capital Deepining= Labour productivity- multifactor productivity
2 Parts of productivity determinants
Productivity improvements and underlying factors in an economy
3 parts of Productivity improvements
Productivity of labour, capital and multifactor productivity
Productivity of labour
Refers to human capital i.e the health, education and skills of the workforce
3 things under productivity of capital
Tech advances
Accumulation of Knowledge
Specialization in production
Accumulation of knowledge
Are seen as central in the development and application of new technologies (i.e innovation)
4 things under multifactor
Firm improvements
Production techniques
Managing organisational change
Adapting to change
Firm improvements
Improvements in firm organisation, management practices and work arrangements can be a major source of productivity
Production techniques
Bringing into operation better production techniques and the accumulation of physical capital
4 things under governments role
Promoting competition
Openness of the economy to trade and investment
Access to overseas
Regulations
Access
To overseas tech and management expertise may not be possible without openness to foreign trade and investment
Regulations
Can inhibit the adoption of different production methods and new technologies
Productivity and economic growth
Surrounds the law of diminishing marginal returns as its difficult to maintain sustained EG simply by adding more resources, thus an increase in productivity is needed to maintain a sustained growth rate
3 changes in productivity over last 10 years
Improvments following the mining boom due to increased capital investment
Mining boom dip due to decreased incentive to work
changes in debt policy make Durable goods more affordable thus improving performance
Productivity and inflation
By shifting supply it can be seen that inflation decreases- becuase productivity decreases cost push inflation
Productivity and employment and redistribution
By achieving growth it means higher level of employment which also improves the redistribution of income
Allocation of Resources and productivity
Obviously assists in improving the efficient allocation by improving allocative efficiency
7 supply side policies
Tax reform
Deregulation
Labour market reform
Trade liberalization
research and innovation
Education and training
Investment in infrastructure
3 ways for labour market reform
Fairk Work act 09, work choices, national employment standards
What is labour market reform
Involves changes or modifications to the laws relating to the setting of wages and the negotiation of working conditions
Fair work act
Created enterprised based bargaining, good faith bargainign and ammendements for family friendly nature and assistance with unfair dismissal
What is good faith bargaining
Requires each party to make a sincere effort in negotiations
What is deregulation
Removal of unnecessary restrictions that impede the free market from operating effectively
1 ways for deregulation
Removal of monopilies
Removal of monoploies
progressive Privitisation of Telstra in the 90’s dismantlted monopoly control over telecomms allowing for optus and vodofone etc to enter the market
effect of removal of monopolies
Intensifies competition because privatised companies are more driven to increase efficiency as they are forced to keep their profit margin
Tax reforms what is
Changes to tax rates and the removal of inefficient taxes
Tax reform affect on productivity
Lowering production costs of firms as well as using tax savings to improve quality of labour and capital
3 tax reform policies
Company tax rate cuts
Asset write off
Small Corporations
Company Tax
Company tax rate cut to 25% for small and medium soized companies with an annual turnover less tha 50 million
Asset write off
Instant asset write off thresholf to 30,000 heping to reinvest in business, employ more workers and grow.
Small corportations Tax
Jobs and small businesses package in the 105 budget saw a 1.5% cut in tax for small corporations
3 p’s for Real Gdp Growth
Popultation Growth Participation rates growth Productivity growth
Trade liberalization what is it
Refers to trade agreements, tariff reductions and subsidy re movement
How does trade liberalization refer to productivity
- Removing subsidies forces domestic firms to improve productivity.
- Cheaper intermediate/capital goods -
Reducing COP
Effect of labour market reform
Greater incentive to work harder increasing productivity as employees know they will be able to achieve pay rises that they can negotaite with their employer not the government
What is competition policy
Is not just examining the laws that encourage competitive behaviour but also removing restrictions that may impede competition
What was the NCP
Aimed at increasing competition, lower prices and greater efficiency in the use of resources by firms
2 NCP measures
Strucutral reform of public sector monopolies to faciliatate competition
A review of all legislation across AUS that restricted competition
Example of trade liberalization
The general tarrif rates on most goods and services were progressively reduced from around 36% to 5% by 1996
What is research and innovation
Implementation of a new/improved product process and marketing methods in business practices or external relations
Effect of innovation of productivity
Involves access to new products/industries and markets helping to drive productivity
Eg of innovation
National Innovation and Science Agenda will drive smart ideas for business growth and local jobs through 1.1 billion for 24 iniatives
What is infrastructure policy
Refers to policy around economic infrastructure like rail,road,ports and sewerage
2 benefits of infrastructure to productivity
Less travel time for goods and people
Connectivity between regions
Eg of infrastructure policy
2007 Rudd gov committed 22 billion to AUS link to beat capacity constraints and bottlenecks in transport infrastructure
