We have long known that Australians live in a hard-working nation, with employees commonly having some of the longest working hours in the developed world. The combination of productivity and number of hours worked are, of course, fundamental for shaping the health of our economy and the wellbeing of all Australians.
Shifting work-life balance and productivity
There are many trade-offs at work. As the population ages, the ratio between working age and retired population declines, and so it becomes increasingly important for productivity and tax revenues to make up the difference. But the balance between work and wellbeing is also critically important, and perhaps higher than ever in the light of the recent and ongoing COVID-19 pandemic. Indeed, the pandemic triggered a number of waves of change in Australia and internationally, from the ‘Great Resignation’ to the pronounced increase in regional living and working from home, and altered commuting patterns and outlook.
But keeping track of productivity over time is not simple, especially as our population grows through internal migration and net overseas migration, and restructures in line with the pandemic patterns of change that we have witnessed and continue to see evolve. In Australia, it is of particular policy interest to monitor how productivity is changing over time, and over its diverse geography. A number of important policy questions arise:
- How are inter-state and metropolitan-regional patterns of relocation, commuting and working from home affecting productivity?
- How do they impact on quality of life and wellbeing, and are these changes offsetting or complementary?
- How do the geographic shifts affect productivity? For example, are people actually more productive when they prioritise wellbeing by moving to regional areas?
- How can we quickly and accurately capture those movements of people (and businesses) on productivity?
There is, however, a solution that can be updated relatively easily and is able to provide a snapshot of how economic productivity is advancing over time nationally, for each state, and even for regional areas within Australia. This new study shows that it is possible to take advantage of Australia’s uniquely dispersed geography and internal climatic diversity. Data on these measures, when combined with remote sensing (or satellite imagery) data, are a powerful predictor of productivity.
Results from analysis of satellite imagery
In the study we found that areas with more liveable climates also attract a higher proportion of migrants, and that this helps explain population change. We used the wage rate as a proxy for productivity, which is a common approach in economics. Controlling for job type and socio-demographic differences, wage rates are a good proxy for productivity. People are paid higher wages when their productivity leads to higher business profitability.
But, the sweet spot in the productivity predictive model is provided by the satellite data. In particular, night-time light or luminosity correlates strongly with productivity. When we examine remote areas over time, their growth in terms of both population and economic output lead to more intense and more widely distributed night-time luminosity. This pilot study paves the way for more regular updates, ideally using very up-to-date commercially available night-time light data. In time, this will provide Australia with a rapidly moving way of monitoring the geographic distribution, and growth over time, of economic productivity.
Chris Leishman is Professor of Property and Housing Economics at the University of South Australia. His research spans housing policy, housing supply, economic productivity and both spatial and temporal modelling of urban economies and housing systems.
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