Handbook of Methods > Productivity Measures: Business Sector and Major Subsectors

Handbook of Methods Productivity Measures: Business Sector and Major Subsectors History

Productivity Measures: Business Sector and Major Subsectors: History

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Timeline of events

The U.S. Bureau of Labor Statistics (BLS) started releasing industry level labor productivity measures in the1800s. The following is a timeline of events that have taken place.

1898 BLS releases “Hand and Machine Labor,” a study of 60 manufacturing industries.
1920 BLS begins publishing industry indexes of labor productivity.
1922 the BLS fourth commissioner, Ethelbert Stewart, signed an agreement with the Babson Statistical Organization for a productivity study of the construction industry.
1935 BLS applies to the Works Progress Administration (WPA) for funds to conduct studies of productivity in 50 industries.
1940 Congress authorizes BLS to start continuing studies of productivity and technological changes.
1942 BLS begins a number of studies of labor requirements for defense industries related to World War II.
1955 BLS published labor productivity measures for manufacturing as a whole covering the 1939–55 period.
1959 BLS published labor productivity of the total private economy covering the 1909–58 period.
1976 BLS begins to publish quarterly indexes of labor productivity, compensation per hour and unit labor costs for the business, nonfarm business, manufacturing—including durable and nondurable goods producing subsectors—and nonfinancial corporations sectors.
1983 BLS began publishing multifactor productivity (MFP), which is also referred to as total factor productivity (TFP), for private business, private nonfarm business, and manufacturing sectors.
1987 BLS started publishing the multifactor productivity measures for the manufacturing sector including total, durable, and nondurable manufacturing and 20 Standard Industry Classification (SIC) manufacturing industries.
1989 BLS moves to an hours-worked measure instead of hours-paid measure in the major sector labor productivity program to better reflect the labor being used in production.
1994 BLS add the effects of research and development (R&D) spillovers to private nonfarm business MFP. BLS also begins publishing measures of labor composition for private business and private nonfarm business.
1995 BLS adopts the Annual chain-weighted Törnqvist indexes for measuring changes in industry output.
1996 BLS incorporates improved Bureau of Economic Analysis (BEA) measures of real output in the U.S. business and nonfarm business sectors based on superlative indexes in the major sector labor productivity program.
1998 A major industry expansion is completed, increasing labor productivity coverage from 180 industries to more than 500 industries.
1999 Nonmanufacturing MFP measures and detailed industry unit labor cost measures on at the National Income Product Account level are published for the first time.
2000 BLS expands Industry multifactor productivity measures to cover all 140 3-digit SIC manufacturing industries.
2003 Industry labor productivity measures are converted from the SIC system to the North American Industry Classification System (NAICS).
In the mid-2000s, BLS productivity program conducted research into measuring the labor composition at a more detailed industry basis.
2005 BLS major sector productivity program starts using the BLS Current Population Survey information—that includes employment and hours worked data for the self-employed and unpaid family workers to accurately account for multiple jobholders.
2006 BLS publishes its 60 NIPA-industry MFP KLEMS measures based on the NAICS system for the first time.
2007 Industry multifactor productivity measures are converted from the SIC system to the NAICS system.
2008 A collaborative project between the BLS productivity program and the BEA National Accounts begins to measure productivity at the total economy level leading to produce a concordance from the national accounts measures to the BLS productivity programs measures.
2009 BLS publishes measures of employment and hours of all persons for all 3- and 4-digit industries. Also in the same year, it introduces a total economy measure of MFP.
2014 Industry labor measures are published as hours worked instead of hours paid.
2015 BLS includes intellectual property products in the asset composition for private business, private nonfarm business, and the detailed industries in order to align capital services with BEA value-added output.
2016 Labor composition for the 60 NIPA-industries encompassing the private business sector was added.

2017 BLS improves major sector productivity measures by incorporating a new methodology for calculating the hours worked to hours paid adjustment ratios based on detailed industry data from the BLS National Compensation Survey was introduced.

The U.S. Bureau of Labor Statistics (BLS) has produced studies of labor productivity since the 1800s. The fourth BLS commissioner Ethelbert Stewart made great strides in advancing productivity measurement when in 1922 he signed an agreement with Babson Statistical Organization for a productivity study of the construction industry. While that program was unsuccessful, Stewart brought Ewan Clague from the University of Wisconsin to lay the foundation of an industry productivity program to measure output per man-hour for the steel, automobile, shoe, and paper industries. A year later, 11 more industries were added. Clague would later go on to become the sixth BLS commissioner.^⁠1

By 1935, a productivity project was proposed to the Works Progress Administration (WPA) to conduct a productivity study of 50 industries. In cooperation with the WPA National Research Project on Reemployment Opportunities and Recent Changes in Industrial Techniques, the Bureau conducted several labor productivity surveys. The main concern at the time was from displaced labor due to technological advances such as the telephone and automation developments in the steel industry. At the urging of unions, Congress authorized BLS to continue the labor productivity studies and devoted funds to support that effort resulting in the Productivity and Technological Development Division in 1940.

After a brief pause for World War II, productivity studies were resumed. However, the funding for surveys was cut, forcing the productivity program to rely on secondary sourcing to compile statistics. That tradition carries on today, as the productivity program entirely relies on other agencies and programs for data to measure the nation’s productivity growth. The productivity statistics in the 1950’s were a source of great debate from a labor and management perspective. The policy implications of the statistics, as well as the complexity of the measures, provided both labor and management plenty of things to debate, and that dialogue continues to this day.

Labor productivity

Labor productivity measures were published for manufacturing as a whole in 1955—covering the period from 1939 to1955. That work expanded to publication of labor productivity of the total private economy in 1959 to cover the period from 1909 to 1958.^⁠2 The productivity measures were later extended to quarterly indexes of labor productivity, compensation per hour and unit labor costs for the business, nonfarm business, manufacturing (and its durable and nondurable goods producing subsectors) and nonfinancial corporations sectors in 1976. The primary source of labor input for productivituy measurement has always been BLS Current Employment Statistics program data on employment and paid hours of employees in nonfarm establishments. To better reflect the labor being used in production, BLS moved from using an hours-paid measure, which inaccurately captured vacation time as work time, to a more appropriate hours-worked measure in August 1989.^⁠3

Improvements have continued as they have become available. In 1996, the labor productivity program incorporated improved Bureau of Economic Analysis measures of real output in the U.S. business and nonfarm business sectors based on superlative indexes rather than constant dollars. The BLS Current Population Survey had long provided employment and hours worked data for the self-employed and unpaid family workers, when in June 2005 the BLS productivity program began to use information from this survey to take proper account of multiple jobholders. This improvement resulted in the entirely jobs-based employment estimate used in the labor productivity estimates.^⁠4 Another improvement was made in 2017 when a new methodology for calculating the hours worked to hours paid adjustment ratios based on detailed industry data from the BLS National Compensation Survey was introduced.

Multifactor productivity

In 1983, BLS developed and began publishing a broader measure of productivity, multifactor productivity (MFP), which is also referred to as total factor productivity (TFP), for private business, private nonfarm business and manufacturing. These measures of MFP use capital and labor for combined inputs and were among the early statistical organizations to adopt the use of a changing weight Tornqvist superlative price index.^⁠5

Over the years, the BLS productivity program increased the number of MFP series measured. In 1987, BLS expanded its MFP measures to include detailed coverage of the manufacturing sector with the release of total, durable, and nondurable manufacturing and 20 Standard Industry Classification (SIC) manufacturing industries. These measures fit the growth accounting framework of KLEMSusing a sectoral output measure that includes energy, materials, and purchased services in addition to capital and labor for combined inputs.^⁠6

BLS first introduced nonmanufacturing industry productivity measures in 1999 and as prices and data expanded with a BLS-wide and statistical community-wide service initiative in the early 2000s, continued to improve on these measures. In 2006, BLS published its 60 industry measures on a North American Industry Classification System (NAICS) system for the first time. A total economy measure of MFP was introduced in 2009.

Improvements to the measurement of the multifactor productivity estimates were also made along the way. An improvement to measure the effects of the research and development (R&D) spillovers was made in 1994. This measure was added to private nonfarm business in 1994.^⁠7

In 1994, BLS also began publishing measures of labor composition for private business and private nonfarm business. In the mid-2000s, the BLS productivity program conducted research into measuring the labor composition at a more detailed industry basis.^⁠8 In 2016, the 60 sectors encompassing the private business sector were labor composition adjusted and that adjustment was fully integrated into the private business sector labor composition measure.

As part of the 2013 National Income and Product Accounts (NIPA) comprehensive revision, BEA incorporated intellectual property products into private fixed investment (PFI) measures. Intellectual property products are comprised of software (purchases of prepackaged software and own-account software), research and development, and artistic originals. Starting in 2015, BLS now includes intellectual property products in the asset composition for private business, private nonfarm business, and the detailed industries in order to align capital services with BEA value-added output.

Collaborative studies

In 2008, a collaborative project between the BLS productivity program and the BEA National Accounts began to measure productivity at the total economy level. The first effort produced a concordance from the national accounts measures to the BLS productivity programs measures.^⁠9 Subsequent efforts produced a 63-industry decomposition of GDP by the capital, labor, energy, material, services, and multifactor productivity measures back to 1987 and research into a historical series back to 1947 was completed, meeting the desires of many key macroeconomist stakeholders.

Notes

^⁠1 First Hundred Years of the Brureau of Labor Statistics, Bulletin 2235 (U.S. Department of Labor, September 1985), https://fraser.stlouisfed.org/files/docs/publications/bls/bls_2235_1985.pdf.

^⁠2 Ibid, pp. 203.

^⁠3 Mary Jablonski, Kent Kunze, and Phyllis Flohr Otto, “Hours at work: a new base for BLS productivity statistics,” Monthly Labor Review (February 1990), pp. 17–24.

^⁠4 To learn more on job-based employment estimates, visit https://www.bls.gov/lpc/lprjobsnote.pdf.

^⁠5 Edwin R. Dean, Michael J. Harper, Mark S. Sherwood, “Productivity measurement with changing weight indexes of outputs and inputs” (paper presented at the OECD Expert Workshop on Productivity: International Comparison and Measurement Issues, May 2–3, 1996), https://www.oecd.org/sti/ind/1825894.pdf.

^⁠6 See Robert Solow, “Technical change and the aggregate production function,” Review of Economics and Statistics, August 1957, pp. 312–320.

^⁠7 The Impact of Research and Development on Productivity Growth, Bulletin 2331 (U.S. Department of Labor, September 1989), https://www.bls.gov/mfp/research_and_development.pdf.

^⁠8 Cindy Zoghi, “Measuring labor composition. A comparison of alternate methodologies,” in Katharine G. Abnraham, James R. Spletzer, and Michael Harper, eds, Labor in the New Economy (University of Chicago Press, 2010), pp. 485–91, https://www.nber.org/chapters/c10834.pdf.

^⁠9 Dave Wasshausen, Brent Moulton, Steven Rosenthal, Michael Harper, “Integrated GDP-Productivity Accounts,” American Economic Review, vol. 99, no. 2, May 2009, pp. 74-79, https://www.aeaweb.org/issues/100.