Most Valuable Workers

Which industries are ripest for technological disruption? Australia labour productivity and value-add by industry.

Digging holes in the ground is hard for people, but easy for machines.

Finessing finicky guests, on the other hand, is often thought to require one or more sets of the human touch.

This is reflected in Industry Value Add per employee.

ANZSIC Div	Industry	2009-10	2019-20	Change
B	Mining	$618,608	$1,097,800	77%
D	Electricity, Gas, Water And Waste Services	$300,019	$433,100	44%
J	Information Media And Telecommunications	$199,661	$234,400	17%
L	Rental, Hiring And Real Estate Services	$143,784	$212,000	47%
F	Wholesale Trade	$102,327	$131,400	28%
C	Manufacturing	$102,769	$129,400	26%
M	Professional, Scientific And Technical Services	$93,098	$121,600	31%
I	Transport, Postal And Warehousing	$98,082	$119,800	22%
E	Construction	$92,945	$114,400	23%
N	Administrative And Support Services	$56,510	$78,200	38%
O	Public Administration And Safety (Private)	$57,424	$76,400	33%
P	Education And Training (Private)	$52,988	$75,600	43%
Q	Health Care And Social Assistance (Private)	$57,286	$75,000	31%
S	Other Services	$51,586	$66,500	29%
R	Arts And Recreation Services	$54,000	$66,100	22%
A	Agriculture, Forestry And Fishing	$46,271	$61,800	34%
G	Retail Trade	$49,239	$59,900	22%
H	Accommodation And Food Services	$11,919	$39,200	229%

A miner driving an ore hauler accompanies a whopping 25 times the value of a hotelier and 13 times that of a (private) health worker.

That their salaries are not commensurately disparate, despite anecdotes of six-figure-salaried apprentices in the Pilbara, is explained by Baumol's Cost Disease. Employers must wage-match no matter the productivity of their workers or face a dearth or deluge of candidates, and make up the surplus or shortfall in other ways.

Because doing things better has often meant doing things cheaper and with less labour, there are consequences for the lagging industries forced to pass increased costs onto customers.

Where demand can shrink, it does. The cost to attend a string quartet recital has increased because the labour required to perform them has remained the same, and so we cram into concert halls far less frequently. 

Where demand is inflexible, Governments may prop up worker-heavy industries like health care.

Another potential outcome is disruption, commonly by technology. The fruit hang lowest where workers add the least, through no fault of their own it must be stressed. It makes sense then to aim innovation at retailers rather than miners.

Though shopping has been transformed by the internet and self-checkouts, there appears to be room for more upheaval.

As for the hero-worship showered upon health workers during COVID-19, the fact that they accompany nowhere near the most value indicates that a more efficient system could have saved more lives or gotten by with fewer workers.

It also makes sense to target industries that have changed the least in recent history. Despite the media sector being already lean, the rapid advance of streaming services should come as no surprise.

All but one sector are covered in the Industry Value Add figures. Notably absent are Financial Services.

We look to labour productivity (quality adjusted hours worked) to see that finance workers are among those most rapidly improving in efficiency.

Productivity Change by Industry	1994-95 to 2019-20
J Information, media and telecommunications	143%
A Agriculture, forestry and fishing	95%
K Financial and insurance services	72%
G Retail trade	57%
R Arts and recreation services	52%
I Transport, postal and warehousing	45%
F Wholesale trade	42%
C Manufacturing	41%
S Other services	39%
H Accommodation and food services	26%
B Mining	25%
M Professional, scientific and technical services	11%
E Construction	9%
L Rental, hiring and real estate services	4%
D Electricity, gas, water and waste services	-2%
N Administrative and support services	-24%

The figures notably omit Public Administration, Healthcare, and Education. Furthermore, they do not allow for comparisons between industries. 

Perhaps for the best, as we would be tempted to conclude that certain sectors are filled with slackers or pampered by disincentives to innovate. In reality however, adding value depends on factors other than labour, like materials, equipment, and finance.

Indeed, it may be that some industries where labour is intrinsic may have hit limits to productivity. Further rationalisation would mean categorical change. A string quartet streamlined is no longer a quartet, but a trio.

Nevertheless, looking to Industry Value Add and Productivity prompts us to challenge where labour is essential. It also indicates which industries will most likely experience - or continue experiencing - disruption.