Productivity Means Whatever You Need It To

Few words in Australian public life work harder than productivity. Treasurers use it. Reserve Bank governors use it. Business groups, unions, think tanks and columnists use it. Everyone agrees we need more of it.

Ask them what it means and you’ll get at least three answers.

Economists mean something narrow and dull. Productivity is output divided by input, and for the whole economy that usually means GDP per hour worked. It’s about getting more from what you’ve already got. The economist Paul Krugman summed up why it matters: “Productivity isn’t everything, but in the long run it is almost everything.” It’s how living standards rise without everyone working longer.

Workers hear something else entirely: work harder, for longer, for the same money. When a manager announces a “productivity drive”, nobody in the lunchroom thinks “GDP per hour”. They think “more emails at 9pm”.

Business often hears cost-cutting: fewer people doing the same work. That can raise output per hour, but it’s the least interesting way to do it, and the one most likely to annoy the people still in the room.

So when a headline says productivity is flat, three groups nod at once and picture three different problems with three different villains. That’s why productivity debates go nowhere. They aren’t really arguments. They’re three conversations sharing a word.

It gets odder. Productivity is notoriously hard to measure in services. The economics writer Peter Martin points out that if an aged care home hires more carers per resident, care gets better and measured productivity goes down. By the numbers, a kinder system can look like a worse one.

None of this means the word is useless. It means it’s overloaded. When a word carries that much meaning, the people using it stop checking whether they mean the same thing.

The fix is the same in a nation as in a boardroom. Before you argue about productivity, define it out loud: output per hour, cost per unit or value per customer. You’ll often find there was less disagreement than everyone thought. Or more, but at least it’s the real one.

The word itself is honest. It comes from the Latin producere, to bring forth. It was always about what you make, not how much you suffer making it.