Motivating effort through flagellation

Following yesterdays brainstorm on compulsory work, another post on NZ catching Australia has inspired a policy prescription.  State funded flagellation agents for firms.

Government has set a prosperity target, to match Australia’s GDP per capita by 2025.

Efforts to increase the availability of capital for productive firms and to innovate more effectively are important steps in the right direction, but effort improvement should contribute too.

Labour productivity, the output per hour worked, is the most significant driver of a nation’s GDP per capita. New Zealand performs relatively poorly on measures of labour productivity, ranking 22nd of 30 OECD countries, whereas Australia ranks 13th.

Improving labour productivity can be achieved by improving, amongst other factors, contributions from innovation, capital and effort.  Flagellation motivates managers and workers to find ways to produce more valuable output per hour worked.

Growing New Zealand’s prosperity depends on developing successful international businesses, and businesses will only be successful if they are competitive. Achieving competitiveness, by providing more valuable products and services or by having lower cost structures, requires world-class effort.

The target to match Australia’s GDP per capita by 2025 is ambitious. Effort improvement is only part of the solution but it is very important.

On a serious note, an individual’s decision to develop skills and the such is part of their choice given the payoffs available in the labour market.  If we are going to subsidise it let’s actually try to figure out what the “public returns” are from this education – rather than spouting off truisms regarding labour productivity or flagellation.

Again, remember that the purpose of policy is to improve/maximise welfare – not to meet GDP targets or redesign the economy/society in our own image …