The opportunity in government productivity

The McKinsey Center for Government: “Governments face a pressing question: How to do more with less? Raising productivity could save $3.5 trillion a year—or boost outcomes at no extra cost.

Higher costs and rising demand have driven rapid increases in spending on core public services such as education, healthcare, and transport—while countries must grapple with complex challenges such as population aging, economic inequality, and protracted security concerns. Government expenditure amounts to more than a third of global GDP, budgets are strained, and the world public-sector deficit is close to $4 trillion a year.

At the same time, governments are struggling to meet citizens’ rising expectations. Satisfaction with key state services, such as public transportation, schools, and healthcare facilities, is less than half that of nonstate providers, such as banks or utilities.

Governments need a way to deliver better outcomes—and a better experience for citizens—at a sustainable cost. A new paper by the McKinsey Center for Government (MCG), Government productivity: Unlocking the $3.5 trillion opportunity, suggests that goal is within reach. It shows that several countries have achieved dramatic productivity improvements in recent years—for example, by improving health, public safety, and education outcomes while maintaining or even reducing spending per capita or per student in those sectors.

If other countries were to match the improvements already demonstrated in these pockets of excellence, the world’s governments could potentially save as much as $3.5 trillion a year by 2021—equivalent to the entire global fiscal gap. Alternatively, countries could choose to keep spending constant while boosting the quality of key services. For example, if all the countries studied had improved the productivity of their healthcare systems at the rate of comparable best performers over the past 5 years, they would have added 1.4 years to the healthy life expectancy of their combined populations. That translates into 12 billion healthy life years gained, without additional per capita spending…(More)”