At the end of May, the Australian Government’s Productivity Commission released a research paper exploring the causes of a unique ‘productivity bubble’ associated with the COVID-19 pandemic. From the start of the pandemic through March 2022, the productivity of Australia’s workforce rose to a new peak, the first significant gain after a five-year period of stagnation. Then, in a little over a year, the productivity gains seen during the pandemic were erased.
Graph published in Australian Government Productivity Commission (28 May 2025). Productivity before and after COVID-19: Research paper
What accounts for this rise and subsequent fall in workforce productivity? And what might employers learn from the Commission’s research to apply to their operations and employment practices? The Commission’s research does much to explain the phenomenon, though many questions remain.
As a provider of employee support services in Australia and other countries, Workplace Options is able to offer some additional insights. We understand, through close work with employers and employees, that the engagement, focus and wellbeing of workers are inextricably linked to their productivity and to the wider success of their organisation.
Finding 1: Shifts in what work was being done
In the first year of the pandemic, some types of work stopped or were sharply curtailed (such as hospitality and the arts), whilst others continued with little change (such as utilities). On balance, the Commission’s research found that the industries which cut back were lower in per-employee productivity, so the change in the mix of active industries resulted in higher overall measures. This, of course, was neither positive nor a sustainable development, and it did not continue beyond the end of 2020. At that point, other factors came into play to drive another wave of productivity growth, which was then followed by a drop.
Finding 2: The balance of capital investment and labour force growth
Workers need effective tools and processes to be productive in their work, and capital investment is needed to supply them. The Commission’s research found that the levels of capital investment remained mostly steady throughout the pandemic and after, whilst the number of workers dropped initially, then increased at a rapid rate. This mismatch between the rates of capital investment and labour force changes contributed both to the rises in productivity in 2021 and early 2022, and to the decline over the following 15 months.
Finding 3: Shifts in the skills and experience of workers
In any economic downturn, the youngest and least experienced workers – those with the shortest tenure – tend to be affected most heavily by layoffs. This was the case during the pandemic. As a result, the labour force during much of the pandemic was weighted toward more skilled and experienced workers. The Commission’s research found that this contributed to the rise in productivity through early 2022. Then, as the economy rebounded and additional workers were needed, younger and less experienced workers were hired (or rehired), with some loss in average per-employee productivity. (Over time, as these new workers gain experience and are more thoroughly trained, their productivity can be expected to improve.)
Finding 4: Longer work hours
The report mentions that people worked more hours during the period when productivity was falling. This can be seen in data from Labour Account Australia, as charted below. The timing of the rise in individuals’ work hours coincides exactly with the nationwide productivity drop.
Source: Australian Bureau of Statistics, Labour Account Australia, Data Downloads, Table 1. Total all industries – trend, seasonally adjusted and original. Accessed 11 June 2025 at https://www.abs.gov.au/statistics/labour/labour-accounts/labour-account-australia/latest-release#data-downloads
Other research (from Stanford University, IZA and the World Health Organization) has tied long work hours to reduced productivity due to stress, fatigue and other negative health effects. Long work hours and burnout are also associated with absenteeism, attrition, reduced focus and an increase in errors, accidents and injuries (Workplace Options).
Employee wellbeing and productivity
It’s important to remember that it is people who are productive. The productivity of individuals combines to make up the productivity of the organisation and the nation. At Workplace Options, our daily work involves supporting employees who are struggling with issues that affect their work, wellbeing and productivity, and advising employers on ways to maximise the contributions of their employees.
The Productivity Commission’s research shines a light on measurable factors that have affected the overall productivity of the Australian economy. Most of these factors also affect productivity within organisations: capital investment in tools to make work more efficient; the hiring, training and retention of skilled workers; and conditions that support productive work, including reasonable work hours.
There are other factors, too, that affect workers’ productivity. Some are harder to measure, such as employee wellbeing, engagement with work and the degree to which an employee feels supported and appreciated by their employer. Work hours are easy to measure, but levels of stress, energy, fatigue, focus or distraction may be more relevant to productivity. Paying attention to all these factors can help an organisation improve its bottom line. It can also help improve the lives of workers.
