Wednesday, May 30, 2012

Productivity in different sectors of the economy

In this post I wanted to look at productivity in different sectors of the New Zealand economy. Productivity is an important measure in economics, as it measures what can be produced with a given amount of inputs. The greater the productivity, the greater the amount of goods and services that can be produced. It is one of the main reasons why countries like Luxembourg and the United States are as rich as they are. Their high productivity means the workers in these countries are able to produce more in less time than workers in other countries.

So now I pose a question:

Who are the most productive workers in the New Zealand economy?

In principle, this should be a very easy question to answer. Simply look at the production figures for each sector of the economy, and divide this by the number of workers in each sector. Unfortunately, it’s not quite that simple, as the data makes no distinction between part-time and full-time workers.

The figures for this analysis are taken from Statistics New Zealand, which is a reliable source of information. I have, on the chart below, the number of workers in each sector, and each sector's contribution to GDP for 2011.

The missing element that lets this analysis down however, is the lack of data on hours worked in each industry. In some sectors such as retail and restaurants, there is a greater proportion of people working part-time compared to other industries such as manufacturing. Statistics New Zealand does have data on total hours worked in New Zealand, but unfortunately, this is not broken down into different economic sectors. A true analysis of worker productivity would divide total production by hours worked, instead of dividing by the number of workers. This means that the figures below need to be taken with a pinch of salt. Figures are in current NZ dollars

Table 1: Output per-worker in New Zealand
 
Sector Number of workers in sector GDP  per sector GDP per worker
Agriculture, fishing, forestry, and mining                          159,900 $15,398,000,000 $96,298
Manufacturing                          256,800 $24,699,000,000 $96,180
Electricity, gas, and water                             16,800 $3,996,000,000 $237,857
Construction                          178,800 $7,981,000,000 $44,636
Wholesale trade                          109,000 $14,861,000,000 $136,339
Retail, Accommidation and Restaurants                          335,500 $15,394,000,000 $45,884
Transport and communication                          140,600 $21,177,000,000 $150,619
Finance, insurance, and business services                          346,700 $59,347,000,000 $171,177
Government admin and defence                          126,900 $10,116,000,000 $79,716
Personal and Community services                          558,400 $24,737,000,000 $44,300
Total                       2,229,400          197,706,000,000 $88,681




As you can see, the most productive sectors according to this analysis are electricity, gas and water, finance, and transport and communication. This is likely to be because these sectors normally produce high-value goods and services, and use capital such as computers and heavy transport machinery to increase production. As I suspected, the sectors where there is more part-time employment were the least productive, but as I stated above, a different result may occur if hours worked was used instead of the absolute number of workers per sector. Nevertheless, it is still interesting to see the number of workers involved in each industry and their contribution to national production.