Productivity lags jobs growth in agriculture

Difficult times for farmers are reflected in productivity issues for rural servicing companies, according to analysis of small business accounts by Xero.

In the Xero Small Business Insights (XSBI) series, labour productivity for agriculture fell by 12.1% in 2023, in seasonally adjusted constant prices (base 2015).

Productivity is sales per hour worked and sales per employee, and the agriculture sector consists of farming entities and rural servicing companies that pay wages, not farmers as sole traders or owner-operators.

Stats NZ said almost all business in the agriculture sector are small and medium sized, fewer than 50 employees, and about 17,500 employ staff out of the 60,000 total.

Xero has over 600,000 small and medium businesses as accountancy clients in New Zealand but does not disclose how many are in agriculture.

Xero makes the reports from data in its extensive computerised, anonymised client transactions.

“We only count hours worked for people who get a payslip,” Xero said.

“We know that some farm families, self-employed and sole traders don’t issue themselves a payslip, in which case they would not be included in this report.”

For the first time the XSBI report on labour productivity compared NZ sectors and regions and included some comparisons with Australia and the United Kingdom.

The 12.1% fall in productivity in NZ agriculture was the largest of eight sectors and Bay of Plenty, Canterbury and Waikato were the regions hardest hit.

Nonetheless agriculture had productivity of $106/hr worked compared with the national average of $102.

Over a two-year period, 2022 and 2023, Northland had the highest of what Xero called post-pandemic productivity growth.

Labour productivity in Australian agriculture was AU$120/hr ($129/hr), the third highest sector out of 13 categories.

However, productivity in agriculture fell nearly 9% in 2023, the highest sector fall.

“Farming today has become a data- and technology-intensive industry, as farmers grapple with big challenges such as minimising the impact on climate and maximising capacity to feed a growing global population,” the XSBI report says.

“Agriculture is a great example of an industry that has embraced the productivity-boosting idea of investing in tools to amplify work.”

Xero believes that productivity declined in agriculture because of lower commodity prices and strong growth in jobs, averaging 5.5% each month year on year.