Response to the article Can angst about productivity lead to serious public-service reforms?
Productivity gains or losses can be measured in two ways. The conventional way is to measure output growth and compare it to input growth, where input growth includes labour as well as materials and capital, i.e. total factor productivity.
The second way to measure productivity is to measure output prices compared to input prices. This measure should yield the same result as the conventional method. This second method shows the ability of a company or any other establishment to offset input price growth without raising its output prices by as much.
For an organization like government, the second method is far more feasible than the conventional method, which may not even be possible. At a very simplistic level, the second method would measure tax changes over time and compare these with wage-rate increases for labour input and inflation in materials and capital prices.
With all those good economists working in the public sector, and with the help of StatCan, government should be able to undertake such a study to measure its own productivity without much additional cost.
Just undertaking such a project would greatly increase “productivity-mindedness” in the public sector and its suppliers, which I think might be lacking today. And it could boost productivity in and of itself. Notifying all government suppliers that their prices are being monitored might also help.