NZ has long suffered from low productivity. A simple fix is keeping workers happy

The low-productivity bogeyman has long haunted New Zealand, with people working longer hours for lower output than other comparable countries. The country is now one of the least productive in the OECD.

At its most basic level, productivity measures how much output can be produced with a set of inputs. The inputs can be the work of staff, as well as technical innovation, research and development and automation to encourage more efficient processes.

Prime Minister Christopher Luxon has committed to resolving this persistent productivity crisis with science sector reforms and overseas investment.

But after decades of lagging behind the rest of the world, a growing body of research shows the answer could lie in greater support for workers’ mental health.

Linking productivity and mental health

For many, increasing productivity equates to people working “harder” for longer hours – the implication being that if only we “pulled finger” and “knuckled down” the country’s productivity would magically increase.

Instead, could the answer to our productivity crisis be in improving the psychological functioning and mental health of our workforce?

There is a substantial body of evidence showing poor mental health is related to poor productivity. Recent New Zealand data show workers with the poorest mental health lost more than three times the number of productive workdays annually (71 days) than those with the highest mental health (19 days).

Poor mental health can take a toll in the form of time away from work (absenteeism), loss of focus, and emotional exhaustion (presenteeism).

Conversely, measures taken by employers to improve the mental health of workers show a strong positive relationship with increased productivity.

Data from more than 1,600 publicly listed companies in the United States found employee wellbeing predicts higher company valuations, return on assets, gross profits and stock market performance.

Of those interventions used to improve mental health and productivity at work, the most promising appear to target leadership capability, health screening and psycho-socially healthy working environments.

One of the more notable initiatives happened in our own backyard. Andrew Barnes from Perpetual Guardian has been a vocal proponent of four-day work week.

This doesn’t mean packing a 40-hour week into four days instead of five. Rather, its central tenet is reducing the working week (usually to 32 hours), keeping workers’ salaries at 100%, and continuing productivity at 100% (at least) of its existing level.

Results from a pilot with 61 companies in the United Kingdom show an average increase of 36% per annum in revenue for participating businesses, with over 90% of UK businesses that have trialled the programme choosing to continue with it.

Similarly positive results came from a widespread trial of a shorter working week (at full pay) in Iceland, involving 1% of the working population, including office workers, teachers, and healthcare workers.

More than a ‘nice-to-have’

But despite the need to improve productivity and the growing business case for improving employee wellbeing, demand for organisational mental health services has dipped.

Anecdotally, organisations involved in supporting the mental health of New Zealand workplaces have reported a decrease in demand, with many businesses and government agencies citing budget constraints as a major barrier to investing in this area.

This is likely a sign of the economic times, with more than three-quarters of New Zealand business leaders citing economic uncertainty as a key threat to their organisation in 2025.

To some, providing psychological support to workplaces may appear frivolous at worst, and a “nice-to-have” at best. Understanding the mechanisms by which these interventions can boost productivity may help dispel these doubts.

If we consider some of the core symptoms of poor mental health at work – namely exhaustion, reduced focus and greater sickness absence – it’s easy to see how improving workers’ mental health can improve the productivity of a business.

Maintaining workers

The idea of sustainable labour practices isn’t new or radical, nor is it just another attempt to load businesses with extra responsibility for worker mental health.

It is a way to enable people to work more efficiently in the time they have, and to keep them in their jobs for longer. In turn, this improves overall company performance and, crucially, improves population health.

For many businesses, people are their biggest asset. Ensuring your biggest asset is functioning well is as essential to enhancing productivity as regular maintenance and capital expenditure on physical machinery and buildings.

Like any business strategy worth its while, it’s not always easy. But there is too much at stake not to get it right.