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Working Smarter: Driving Productivity Growth Through Skills - TPRP 08/06

Publication Details

  • Working Smarter: Driving Productivity Growth Through Skills
  • Published: Apr 2008
  • Status: Current
  • Authors: MacCormick, John
    • Hard copy: Not available in hard copy.

    Working Smarter: Driving Productivity Growth Through Skills

    New Zealand Treasury Productivity Paper TPRP 08/06

    Published Apr 2008

    Author: John MacCormick


    • How countries perform in developing and utilising skills is one important factor that helps to explain differences in countries’ long-term productivity and growth performance.  The macro-economic evidence about the importance of skills is increasing, and the effects are stronger than previously shown.
    • Higher skills increase individuals’ productivity and the productivity of others they work with.  Skills have a dynamic effect on productivity growth by increasing the capacity to innovate and apply new ideas.  Skills can enhance the returns to capital investment, and increase firms’ ability to adapt to new markets and competitive challenges.
    • The impact of skills on productivity depends critically on the quality of an economy’s institutions, and the effectiveness of firms in utilising the skills of their workforces.  Increased skills have the greatest impact on productivity in open competitive and entrepreneurial economies with efficient labour markets and institutions.
    • Technological change and the increasing integration of the global economy are driving greater mobility of skilled labour, greater returns to skills, and ongoing economic structural change.  In this context, overall skill levels and the opportunities to acquire skills and re-skill become increasingly important for both social and economic objectives.
    • Specialised technical skills are important, but so too are the many “soft” skills such as communication, teamwork, creativity and problem solving.  Attitudes and values matter as much as knowledge and technical skill. 
    • Skill development is a life-long, self-reinforcing process.  It happens not only in formal education, but also in the home, the community and the workplace.  Public policy approaches to skills and productivity must therefore take a broad view, and include a very long-term perspective. 
    • The contribution of skills to productivity depends not only on the overall level of educational achievement, but on how the supply of skills is matched to changing demand (through labour market responses, responsive tertiary education and training systems, and migration) and on firms’ ability to effectively utilise workforce skills.
    • New Zealand has relatively good overall levels of skills and the trends are positive.  We rate near the OECD average for qualifications in the adult population, and there are strong flows of skills into the workforce due to more skilled and qualified school leavers, high participation in tertiary education (including industry training) and skilled immigrants.
    • Wide disparities in achievement are evident at all ages and stages of education.  Low skill levels are more concentrated in the growing Maori and Pacific communities.  Too many young people leave school without a senior secondary qualification, and too few continue to participate in education and training after they leave school.
    • High participation rates in tertiary education in the last 20 years are improving the qualifications profile of the workforce, but in recent years there has been no growth in degree-level graduates.  The low foundation skills of a large minority in the current workforce are a barrier to upskilling and productivity growth.

    Table of Contents

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    Preface to this productivity series


    Taking a broad view of skills

    How skills can drive productivity

    New Zealand's skills profile

    What works to improve skills and skills’ contribution to productivity?



    tprp08-06.pdf (250 KB) pp. 34

    List of Tables

    List of Figures


    This paper was prepared by John MacCormick. Comments were provided by staff in the Treasury. Thanks in particular go to Grace Campbell-MacDonald and Melody Guy.


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