Archive for the ‘Productivity’ Category

Yorkshire robotics (BEST PRACTICE)

October 16, 2007

Yorkshire is to host to a new centre devoted to developing the use of robotic technology in the food industry.

Why? The food manufacturing industry is facing increasing competition from areas with lower labour costs such as Eastern Europe and Asia. To remain competitive, the region’s food and drink manufacturers need to reduce costs and increase efficiency – and a key area will be the greater use of robotics and automation.

The centre, which is open to all companies in the food industry regardless of their size or turnover, is the first of its kind in the UK. Jim Farmery, head of innovation for Yorkshire Forward, said: “The centre will help the longer-term sustainability of food and drink manufacturing companies in the region by helping them to gain competitive advantage and growth and combat the drift of manufacturing to global areas of low labour costs. The centre will act as a hub for intelligent and advanced food automation, providing advice and training for a technically skilled workforce and acting as a research and proving arm for the sector.’ 

Tyranny of Distance is explanatory factor’ says Treasury official

October 16, 2007

Australia’s productivity level has hovered around 80% of the US level for the last 50 years.  The pervasiveness and size of this gap suggests that there is more to it than just differences in economic policy.

One explanation might be found in the natural circumstances of the two countries. The US is 15 times larger in population and 18 times larger in output – and can thus take advantage of economies of scale and scope. The 2003-04 Australian Budget Papers highlighted our internal and external geographic circumstance and noted that ‘fully achieving economies of scale and scope in many industries requires large markets, either domestically or internationally through trade’.

These advantages do not reside with Australia. Gravity trade models provide a good example of the effect of Australia’s distance on trade performance. These models explain how Australia’s distance to the world’s ‘economic mass’ has an impact on Australia’s expected level of trade. Note also Battersby and Ewing (2005). In regressions of labour productivity on an indicator of proximity (which captures a state’s closeness to world economic output) along with physical and human capital, the coefficient on proximity was positive and significant. This suggests that the difference in the average proximity indicators for Australia and the US accounts for around 45% of the labour productivity gap. This further suggests that even over considerable distances (greater than those identified in standard agglomeration economics), there are significant external effects from being located near centres of output. 

‘Does distance matter? The effect of geographic isolation on productivity levels’. Bryn Battersby, Treasury Working Paper 2006 — 03 April 2006. Thanks to Peter Morris for uncovering this gem.  

Nobel Prize winner takes swipe at Europe

October 16, 2007

Edmund S. Phelps has just won the Nobel Prize for Economics, and in 2006 the Wall Street Journal featured his fascinating views on capitalism. Extract follows.

The American and Continental systems are not operationally equivalent. Let me use the word “dynamism” to mean the fertility of the economy in coming up with innovative ideas believed to be technologically feasible and profitable.

In this terminology, the free enterprise system is structured in such a way that it facilitates and stimulates dynamism, while the Continental system impedes and discourages it…The issues swirling around capitalism today concern the consequences of its dynamism. The main benefit of an innovative economy is commonly said to be a higher level of productivity – and thus higher hourly wages and a higher quality of life.

There is a huge element of truth in this belief…Much of the huge rise of productivity since the 1920s can be traced to new commercial products and business methods developed and launched in the U.S. and kindred economies. – these include household appliances, sound movies, frozen food, pasteurized orange juice, TV, semiconductor chips, the Internet browser, the redesign of cinemas, recent retailing methods.

There were often engineering tasks along the way, yet business entrepreneurs were the drivers… Productivity levels in the smaller countries will always owe more to innovations developed abroad. Some might suspect that the domestic market is so tiny in a country such as Iceland, for instance, that even in per capita terms only a very small number of homemade innovations would bring a satisfactory productivity gain and an adequate rate of return. In fact, most of the Continental economies have been content to sail in the slipstream of a handful of economies that do the preponderance of the world’s innovating.

The late Harvard economist Zvi Griliches commented approvingly that in such a policy, the Europeans “are so smart.”

I take a different view. For one thing, it is good business to be an innovative force in the “global economy.” Globalization has diminished the importance of scale as well as distance.

Tiny Denmark sets its sights on markets in the US, EU and elsewhere. Iceland has entered into European banking and biogenetics. France has long done this. But it could do so more successfully if it did not insulate its innovational decisions so much from evaluations by financial markets e.g. Airbus.  

Go to  

Industry Productivity Centres now open

October 15, 2007

Australian Industry Productivity Centres are open for business.

The Australian Government has committed $351.8 million over the next 10 years for these productivity centres as part of its recent Industry Statement. The AIPCs provide a free diagnostic service to help firms identify opportunities to improve performance, with funding of up to $20,000 available for a specialist consultant to facilitate change. The new state managers:   
§          Queensland – Garry Butler – ex BSES Ltd, and ex Partner with PricewaterhouseCoopers.
§          Victoria – Rod Nelson – ex Virgin Blue and ex CEO of Air Nuigini.
§          South Australia – Mr. Kenneth Taplin – ex SA Centre for Innovation.
§          Western Australia – Ms Su-Lin Kwan – ex WA State Manager of AusIndustry.
§          Tasmania and NSW are being announced shortly. 

ILO report – Norway No. 1 re productivity on hourly basis

August 15, 2007



The International Labour Organisation has released its major biennial report on the world labour market.  §          The gender gap (female and male employment-to-population ratios) in East Asia and Developed Economies (12.9% points) and Middle East, North Africa and South Asia exceeds 40% points!§          Agriculture (36%) now second to the services sector (42%) as the main sector of employment. §          Productivity levels increased fastest in East Asia, where output per worker almost doubled. Considerable increases also in Central & South-Eastern Europe (non-EU) & CIS and South Asia.§          USA continues has the highest labour productivity levels (US$63,885), followed by Ireland (US$55,986) and Luxembourg (US$55,641). But Norway has highest productivity when measured on hourly basis (US$37.99), followed by USA (US$35.63) and France (US$35.08). View the 2007 ILO study, Key Indicators of the Labor Market.

Measuring Innovation isn’t simple

In its report New Concepts in Innovation, the Business Council of Australia argues that a contemporary view of innovation should include almost any strategic or operational business change that delivers new outcomes, and that the traditional focus on R&D is flawed.  

The BCA’s view is formed from interviews with 19 Australian companies – but 12 of the 19 had revenues in excess of $1billion p.a., and the smallest was Microsoft Australia, with revenues of $262 million p.a.

True, business innovation does occur through business strategy, management practices, process adaptation etc. To recognise this, the OECD and the Australian Bureau of Statistics have measures of non-technological innovation. However, the innovative capacity of firms is very much dependent on their human capital. This requires better education and training systems AND a significant general R&D capacity to produce the people that can really make a difference by way of understanding and adapting domestic and overseas technologies.  

Some in industry have even argued that international comparisons should not apply to Australia’s laggard performance in R&D investment because of structural differences in the make-up of business from country to country. The case of Finland and Nokia is frequently cited i.e. Finland leads the world in business investment in R&D because its industry contains technologically-based companies like Nokia. 

How easy it is to confuse cause and effect! In 1989, Finland was at risk of becoming an economic basket case – and Nokia was a mere rubber goods and forestry company. The Finnish Government’s strategic decision was to begin investing heavily in R&D, and Nokia’s well-timed choice to invest in new product innovation helped create the most robust of the European economies.

The Finnish R&D sector provided a pool of new discoveries that became the foundations of its industry restructuring. This is precisely why governments must play a policy role in industry development – to R&D and its commercialisation only serves to entrench the existing industry structures in Australia that seem to forgo the investment in R&D that is desperately needed, but goes unrecognised by them.  

Source: MuNet (Manufacturing Society of Australia)