Are you planning to double your salaries?
Rod Oram has written an excellent overview of the challenges facing businesses in developed economies. He’s writing about New Zealand, but it could also apply to many companies in Australia, North America and Western Europe. In a nutshell, he argues that reducing bureaucracy and taxes, while improving infrastructure and education, are not enough, especially in countries with fully deployed labour. In the end, it all boils down to what businesses you invest in, and how those businesses perform and develop.
Oram’s closing paragraph says it all:
Here’s the acid test: what do you need to do in your business so you can reward yourself with at least an 80% increase in pay by 2018? When you achieve that, you will attract all the talent you need - some of it even from Australia.
I don’t think I’ve seen a single business plan or economic development proposal that, as a consequence of success over the next ten years, could afford to pay staff twice what they get today. Most plans assume no change in real terms, while some assume greater internationalisation which reduces average salaries.
If you’re in a business based on labour (no matter how professional), you’ve got a problem. If all you do is pass on someone else’s goods and services, you’ve got a problem. If you make me-too products and services, you’ve got a problem. If you’re creating smart new products and services that aren’t labour intensive, you’ve got a chance. What are you going to do with that opportunity?
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April 28th, 2008 at 8:12 am
Jim - without wanting to sound defeatist, it’s hard to know how we’re going to create that shift on an aggregate level. Sure there’s some building the sort of businesses Rod O talks about, but one can’t help but think that if he’s right, then sooner rather than later we’ll realise that were (close to ) a third world country trying to live as a first world one
What do you think?
April 28th, 2008 at 8:32 am
The 3rd world comparison is nonsense. Go and have a look - NZ is still a relatively rich country. I don’t see a slide into poverty as inevitable. Apart from the occasional poor year, NZ has grown reasonably well since the mid 80s. I forget the ratio, but it only requires a few key industries to lift their game for the flow-on effects to lift the rest. We do need to create some national shifts, but Oram’s point is that most of the potential growth has to be generated at the firm level. Firms can do things without government, or despite government. I find that very encouraging.
April 28th, 2008 at 1:14 pm
It seems to me that we need to look at some, if not all, of the following:
- Invest heavily in education from 0-5 upwards. That’s our future workforce and domestic marketplace. It doesn’t look that flash right now. The smart ones leave and the rest muddle through.
- Create incentives for business and investment into them. The old BES in the UK was pretty good for that.
- Get government out of business.
- Cut red tape and bureaucracy. Planning process is just a nightmare.
- Cut taxes.
Somehow we need to introduce some dynamism into this economy which will build some momentum and energy. I don’t see this happening with the current government. Maybe a fresh hand on the tiller might help?