Productivity and the changing world of work

Today's short post is really an aide memoir to myself, just jottings.

In a comment from kvd on  The Greek crisis - a high stakes game marked by blindness, inexperience and rigidity, kvd provided a link to this Bloomberg piece. In commentary in the video embedded in the piece, there is a reference to games theory. I had actually forgotten that Greek Finance Minister Yanis Varoufakis was an expert in this area. Now I am wondering how this relates to the strategy being followed by the current Greek Government.

A piece in the Canberra Times by Noel Towell ('War for people' looms in the public service) looks at the aging of the Commonwealth Public Service. I have commented previously on the same pattern in the NSW Public Service. In another Canberra Times piece, Tony Featherstone asks Has outsourcing gone too far? Some of his examples struck a real personal chord. 

Over at his place, Winton Bates and I have been carrying out a conversation on productivity triggered by "Will paying for internet content raise productivity growth?". Winton has been very patient with me! My interest here lay in what I perceived to be a gap between the way productivity is measured and what I saw at firm and industry level.

All these things are loosely connected in my mind. Yanis Varoufakis appears to be applying, or attempting to apply, a highly structured set of economic theories on decision making to a very messy political process. Games theory is useful, but has very little to do (at least in my mind) with longer term decision processes. Productivity measurement and the development and application of policy prescriptions based on that measurement is likely to be misleading and even dangerous if the structures on which that measurement is based do not adequately reflect changing realities, including the existence of things that cannot be directly measured. 

Central to my thinking on productivity have been rolling changes in the way we work. This is where the Canberra Times pieces come in. Both relate to organisation efficiency in the short and long term. My thesis, if I can call it that, is that the changing way we work is not adequately reflected in current discussions on productivity nor in the policy prescriptions based upon conventional productivity measurements. 

In the workplace, we combine people with equipment to carry out functions. In conventional productivity terms, that is called labour and capital. However, the way we work actually depends upon the combination of structure (the way work is organised) and know-how (knowledge of how we do things), These change over time. To my mind, and I accept that I am speaking from an inexpert viewpoint, neither is adequately accommodated in current productivity theory. 

Putting it in another way, if in multi-factor productivity measurement, we attribute change to labour and capital as defined with all other factors appearing in the residual, then the measurement of and analysis of the residual becomes very important. 

When I did my Master's qualifying thesis all those years ago on the economics of education, the unexpected size of the residual over longish periods was attributed to improved education, human capital formation embodied in people. That may have been true then when mass education was still spreading. In Western countries I doubt that it's still true.

The changing world of work demands always that we learn new things. We do that mainly on the job. To my mind, changes now in formal education have very few positive productivity effects. Indeed, the opposite may be true. Rather, and this may well have been true in the past, it's the changing structure of work in combination with know-how that really determines the residual. 

This may sound very dry, but as a partial indicator of what I'm talking about look at the consistent complaints across organisations, private and public, about the loss of corporate knowledge, of the know-how on how things are done or indeed might be done better, because of constant restructuring. Change is inevitable, but the pattern of complaints suggests that past a certain point change becomes a drag on performance and hence on productivity. 

 This is just one example. There are many others. In analytical terms, it becomes hard to disentangle the various effects because they feed on each other. Still, I think that we need to make the effort  .