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Chapter 10.
Productivity Measures: Business Sector and Major
Subsectors
Analysis
and Presentation
Indexes of labor productivity show changes in the
ratio of output to hours of labor input. Similarly,
indexes of multifactor productivity show changes in the
ratio of output to combined inputs. However, these
indexes should not be interpreted as presenting the
contribution of the particular input, or combination of
inputs, to production. Rather, changes over time in the
output, labor input, or combined input measures
underlying these productivity indexes may reflect the
influence of other factors including variations in the
characteristics and efforts of the work-force, changes in
the managerial skill, changes in the organization of
production, changes in the allocation of resources
between sectors, the direct and indirect effects of
R&D, and new technology.
Compensation and labor costs
Indexes of compensation per hour measure the hourly cost
to employers of wages and salaries, as well as
supplemental payments, which include employers'
contributions to Social Security, unemployment insurance
taxes, and payments for private health insurance and
pension plans. Measures of real compensation per hour
reflect the adjustment of hourly compensation for changes
in the Consumer Price Index for All Urban Consumers
(CPI-U).
Unit labor costs measure the cost of labor input
required to produce one unit of output and are derived by
dividing compensation in current dollars by the output
index. Unit nonlabor payments measure the cost of
nonlabor items such as depreciation, rent, interest, and
indirect business taxes, in addition to corporate profits
and profit-type income of proprietorships and
partnerships.
Unit labor and nonlabor costs
The Bureau also prepares data on labor and nonlabor costs
per unit of output for the business sector and its major
components. Unit labor costs relate hourly compensation
of all persons to output per hour and are defined as
compensation per unit of real output. Nonlabor payments
are the excess of current-dollar output in an economic
sector over corresponding labor compensation, and include
nonlabor costs as well as corporate profits and
the profit-type income of proprietors. Nonlabor costs
include interest, depreciation, rent, and indirect
business taxes.
In aggregate sectors, productivity changes through
time reflect movements within the various component
industries as well as shifts in the relative importance
of each of the industries. For example, changes in labor
productivity and multifactor productivity are influenced
by the relative shift of inputs (labor and capital) from
low- to high-productivity industries and by productivity
changes in the component subsectors.19
Short-term movements in productivity and unit labor
costs often result from cyclical variation in output, as
noted below, and may also reflect unusual events such as
drought. These short-term movements are sometimes
substantially greater or smaller than long-term averages
of productivity and cost movements. For example,
productivity growth for 1 or 2 years can be substantially
greater than the average for the business cycle that
includes these years.
Availability of results
Indexes of output per hour, compensation per hour, and
related cost data are published twice each quarter in the
BLS news release, "Productivity
and Costs." In addition, quarterly and annual
analyses are published from time to time in the Monthly Labor Review.
Historical indexes of these and related
data are available on request, as are detailed
descriptions of data sources and computational
procedures.
Multifactor productivity measures are announced each
year in the news release, "Multifactor Productivity
Trends." Included are annual indexes of multifactor
productivity, capital inputs, and related measures for
private business, private nonfarm business, and
manufacturing.
Indexes of productivity and related cost data are
available monthly in Monthly Labor Review, and can
be accessed through the BLS home page at www.bls.gov on
the Internet. These sources also include data from the
multifactor and KLEMS productivity measures.
Information on trends in KLEMS productivity in
manufacturing and the ratio of hours at work to hours
paid is available on request from the Bureau.
Footnotes
19 The farm-nonfarm shift is examined in some
detail by J.R. Norsworthy and L.J. Fulco in
"Productivity and Costs in the Private
Economy," Monthly Labor Review, June 1974,
pp. 3-9.
Next: Calculation
Procedures
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