Arthur Sinodinos writes in today’s edition of The Australian:

The incentive effects of this tax package are focused at the bottom end and effective marginal tax rates are increased further up the income chain. There may be some increase in labour supply but it is unlikely to be enough to spark a productivity revolution or deal with the current skilled labour shortages.

That word… I do not think it means what he thinks it means.

Productivity is the quantity of output per input. Labour productivity, for example, is usually measured as real GDP per hour worked. If you increase labour supply, and thus hours worked, you will boost output but not productivity. If there is a proportionate increase in output and inputs, there will be no change to productivity.

Boosting participation is a good thing for all sorts of reasons, but it’s not the same as boosting productivity.

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