Knowledge and innovation for New Zealand: dynamic benefits of a two-stage wage strategy and its unlikely application

Policy makers in New Zealand advocate investments in training and Research and Development (R&D) as effective policy options to increase the country’s level of productivity. However, uncertainty remains about the strategic prioritisation of these policy options. The article examines the impact of public investment in training and R&D on productivity, technological advancement
and innovation. Based on an international survey of empirical findings, the article rejects calls for
substantial government funded training programmes and highlights the limitations of public investment in business R&D. Instead, the article wishes to advance knowledge by developing a two-stage wage strategy in support of a process of ‘creative destruction’, first through initial wage growth, subsequently through wage restraint and, ultimately, in pursuit of a sustainable platform for investment in technological advancement, skills, innovation and economic growth. It concludes with an assessment of political pressures and respective reasons why this strategy, although capable of meeting multiple policy objectives, is unlikely to be favoured by policy makers
and political interest groups.