Productivity in the Service Industries: Report Launch by Service Skills Australia

Service Skills Australia launched the report Productivity in the Service Industries at Service Skills Victoria's Strategic Industry Forum at Treetops at the Melbourne Museum yesterday.

The report was commissioned by the Board of Service Skills Australia (SSA) to describe a range of productivity measures and to compare industry sectors.

Kit McMahon, General Manager of Service Skills Australia, said. "The real value of this report is to put some clear air around the issue of productivity growth and provide an opportunity to see what this means in terms of better targeting skills policy". "The lessons we can draw from this report is that the service industries (retail, hospitality, tourism, personal services and sport and recreation) do significantly contribute to GDP growth. In fact in some measures their productivity outstrips other industries."

Participants drew comparison with some of the recommendations of Skills Australia's report Skills for Prosperity that was launched last Tuesday, acknowledging the need to support skills development in qualifications most needed in the service sectors.

Michael Long, from the Centre for Education in Economics and Training at Monash University and co-author of the report, said "The question that this report does not answer is what the policy settings for skills support should be."

Ian Blandthorn from the SDA (and a member of the Board of Service Skills Australia) said."The reality is that 1 in 3 Australians are employed in these industries and the implications of the CEET report are that policy settings that better suit what is, effectively, the largest employer in Australia, needs to be recognised" Reflecting on how productivity growth is understood by business, participants described the practical reality of productivity measures.

John Sweetman from the AHA said "For many small businesses, productivity is actually about maintaining the bottom line and survival. Skills and education need to be responsive to that and work with the needs of enterprise"

Kit McMahon concluded that "At the end of the day the implications that our stakeholders are drawing from this report is that our sectors are significant contributors to national productivity growth and that governments can work with our industries to improve national productivity. Perhaps more importantly though, is that if this is going to occur, policies need to respond to the reality of each sectors needs and appreciate that one size does not fit all. A move to higher qualifications is important, but for our sectors, ensuring that the needs of the majority of the workforce and businesses are supported is crucial for improving productivity."

Summary and Key Points from Report

SSA commissioned CEET to unpack and describe productivity levels of the service industries. It was published in October 2010.  The work was commissioned to assist in emerging discussions about the nature of productivity and how the service industries compare with other sectors.  Service industry representatives have raised concerns that their sectors were often described as less productive than other sectors and the consequence of this perception resulted in some problems for the sector.

The final report analyses productivity measures used over the last decade and applies them to the service sectors and other industries. The resulting report shows that the service industries significantly contributed to national productivity at rates above many other sectors. Compared with average annual growth of 1.5% in labour productivity and 0.2% in value-added multifactor productivity across 12 market industries:

  • Wholesale services: Labour productivity growth (2.4% p.a.) and value-added multifactor productivity growth (0.7% p.a.) were greater than the market average.
  • Retail services: Labour productivity growth (2.2% p.a.) and value-added multifactor productivity growth (1.1% p.a.) were greater than the market average.
  • Accommodation and food services: Labour productivity growth (1.4% p.a.) and value-added multifactor productivity growth (0.3% p.a.) were about the market average.
  • Arts and recreation services: Labour productivity growth (0.8% p.a.) was less than the market average while value-added multifactor productivity growth (0.6% p.a.) was greater than the market average.

A number of other significant questions are also raised by the report including:

  • The nature of productivity measures and their applicability across the Australian economy
  • How productivity measures may not capture all improvements in productivity growth as it relates to the service sectors.

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VJ Thomas Greader

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