What do we talk about when we talk about Productivity Indicators.- Warning on frequent misleading interpretation of published productivity measures

Vergés-Jaime, Joaquim (2017): What do we talk about when we talk about Productivity Indicators.- Warning on frequent misleading interpretation of published productivity measures.

Abstract

Newspapers and media in general talk frequently on productivity. As, for example, in terms of “.. the problem of our economy is that productivity is comparatively low/is-lagging-behind (and here the figure for a productivity index)”. Or “…There is a need for serious reforms be undertaken addressed to increase productivity, in order our economy become more competitive and so …”; or “..industry’s Unions and Employers Association agreed finally on an increase on salaries equal to the last year increase in productivity.” In any case, data on productivity levels –regarding an economic sector or a country- have last years become one familiar component in the media news and in socio-political debate. The problem is that those data on productivity (which usually are of labour productivity) do not talk us actually of productivity in the sense of personnel and organisations effectiveness, though this is the implicit meaning media and experts do transmit about. And, of course, those data are presented to us as an out-of-discussion ‘measure of productivity’, since the acknowledged source for them are some official statistics institution, national or international, as Eurostat –for the EU countries-, OECD, BLS (US), .. etc. . By way of example: According to Eurostat, the EU’s country with the highest labour productivity level in 2013 was Luxembourg: 163,9; and the following one in the ranking was Ireland (135,5). Quite below appear Germany (107), France (116) and Spain (111), for example. One certainly gets surprised by reading that Luxembourg workers are about 64% more efficient –producing much more goods o delivering much more services per-person- that their German counterparts. The above productivity differences, 163,9 vs. 107 are against all evidence. Or the above indexes do not refer actually to the common-knowledge concept of productivity stated before. Then, what do actually mean those ‘(labour) productivity indexes’ for such and such country? How are they in fact calculated by the statistical public agencies? The present notes, intended for being read also by non-professionals, try to clarify such questions. They start by presenting a summary on the way acaemics calculate the more frequently used productivity measures. And then, attention is driven to how their adaptations to sector (‘industry’) and whole-country level are calculated by statistics agencies. This allows finally to discuss and make clear the real meaning of these indexes. And so to prevent against their frequent misleading use and interpretation, which lead to distorted conclusions regarding the real world.

• Item Type: MPRA Paper
• Language: English
• Keywords: Productivity, sector-level productivity, country-level productivity, Labour productivity, Multi-factor productivity / Total Factor Productivity
• Subjects: D - Microeconomics > D2 - Production and Organizations > D24 - Production ; Cost ; Capital ; Capital, Total Factor, and Multifactor Productivity ; Capacity; E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E24 - Employment ; Unemployment ; Wages ; Intergenerational Income Distribution ; Aggregate Human Capital ; Aggregate Labor Productivity; J - Labor and Demographic Economics > J2 - Demand and Supply of Labor > J24 - Human Capital ; Skills ; Occupational Choice ; Labor Productivity; O - Economic Development, Innovation, Technological Change, and Growth > O4 - Economic Growth and Aggregate Productivity > O47 - Empirical Studies of Economic Growth ; Aggregate Productivity ; Cross-Country Output Convergence

References

Appleton, J. and Franklin, M. (2012), “Multi-factor Productivity – Indicative Estimates, 2010”. ONS data-base releases on mfp.

Blunden, A. and Franklin, M. (2016), “Multi-factor productivity estimates: Experimental estimates to 2014” , ONS data-base releases on mfp

Connors, E. and Franklin, M (2015), “Multi-factor Productivity (experimental) Estimates to 2013” , ONS data-base releases on mfp.

BEA (2011), “GDP and the Economy. Second Estimates for the Second Quarter of 2011”, https://www.bea.gov/scb/pdf/2011/09%20September/0911_gdpecon.pdf

BEA (2016), National Economic Accounts, Gross Domestic Product 2014.

BLS (2006) Overview of Capital Inputs for the BLS Multifactor Productivity Measures; http://www.bls.gov/mfp/mprcaptl.pdf, as of 28/09/2016 access.

BLS (2007) “Technical Information About the BLS Multifactor Productivity Measures”, http://www.bls.gov/mfp/mprtech.htm, as of 28/09/2016 access.

BLS (2016a), “Private Business and Private Nonfarm Business Multifactor Productivity tables, 1987-2015”; http://www.bls.gov/mfp/special_requests/prod3.mfptable.xlsx

BLS (2016b), “Multifactor Productivity and Related KLEMS Measures from the NIPA Industry Database, 1987 to 2014”,https://www.bls.gov/mfp/special_requests/prod3.klemsmfpbymeasure.zip

BLS (2016c) “Industry Productivity”, as of 15-12-2016 acces; http://beta.bls.gov/dataQuery/find?fq=survey:[ip]&q=ip

EUROSTAT(2010), “European System of Accounts”, http://ec.europa.eu/eurostat/product?code=KS-02-13-269.

EUROSTAT(2013), “European System of Accounts – ESA 2010”, European Commission. http://ec.europa.eu/eurostat/documents/3859598/5925693/KS-02-13-269-EN.PDF/44cd9d01-bc64-40e5-bd40-d17df0c69334

Field, S. and Franklin, M. (2014), “Multi-factor Productivity – Indicative Estimates, 2012”. ONS data-base releases on mfp.

OECD (2001) “Measuring Productivity - OECD Manual. Measuring of aggregate and industry-level productivity growth”. http://www.oecd-ilibrary.org/industry-and-services/measuring-productivity-oecd-manual_9789264194519-en

ONS (2015 ) “Labour Productivity, Q3 2015 Dataset”, as 15-12-2016 access. http://www.ons.gov.uk/ons/rel/productivity/labour-productivity/q3-2015/tsd-lpq32015.htm

ONS, (2016) “Multi-factor productivity estimates: Experimental estimates to 2014” (methodology), https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/articles/multifactorproductivityestimates/experimentalestimatesto2014 (as of 28-09-2016 access.

ONS, (2016) on-line tables on MFP:https://www.ons.gov.uk/economy/economicoutputandproductivity/productivitymeasures/datasets/multifactorproductivityexperimentalestimatesreferencetables(as of 28-09-2016 access)

Van Bevern, Ilke (2012) “Total Factor Productivity estimation: A practical review”, Journal of economic Surveys, V. 26, n. 1, Feb 2012 (pp. 98-128).