Productivity is a key economic indicator used to measure the efficiency and competitiveness of an economy. It is a key factor determining the underlying ‘trend’ or ‘potential’ rate of growth of an economy over the medium-term.
Publications
Secondary analysis to calculate productivity of the food chain using already published National Statistcs. Current price estimates of turnover, purchases and labour are deflated using price indices to get volume indices. Consumption of fixed capital volume series are obtained directly. Indices are combined to get an index of output and an index of inputs for food retail, food manufacture, food wholesale and non-residential catering. These combine to give indices for the whole food chain.
An international comparison of productivity across the G7 nations in terms of the level of and growth in GDP per hour and GDP per worker.
Labour productivity statistics in terms of output per worker, output per job and output per hour worked for the whole economy and a range of industries. The release also presents unit labour cost estimates, regional productivity estimates and experimental market sector productivity estimates.
Using a growth accounting framework, growth in output can be decomposed into the relative contributions of capital and labour inputs (in terms of both quantity and composition) as well as a residual component known as multi-factor productivity (MFP) or disembodied technical change.
Supporting material for ONS productivity releases.
Productivity growth The latest estimates of change in the volume of education inputs The latest estimates of change in the volume of education output, and impact of quality adjustment
Quality-adjusted labour input (QALI) is a measure of labour input to economic production which takes account of the composition of the workforce as well as the volume of hours worked. It provides a broader perspective in assessing productivity performance than other labour measures, which focus only on the quantity of labour input. The results are used in multi-factor productivity analysis.
Volume index of capital services (VICS) is a measure of capital input to economic production which takes account of the quality and use of the capital stock across time and different types of assets. VICS weights together the growth of the net stock of assets using a user cost of capital, rather than prices like in the National Accounts. The results are used in multi-factor productivity analysis.
Overview
Productivity measures are essential in assessing the efficiency, competitiveness and underlying ‘potential’ rate of growth of an economy. As such, productivity measures form part of the government’s Public Service Agreement targets, which in relation to productivity are raising the rate of productivity growth over the economic cycle and narrowing the productivity gap with the US, France and Germany.
The Office for National Statistics (ONS) headline productivity measure is output per worker, but other key published productivity measures are output per filled job, output per hour worked and unit wage costs. The first three of these measures are based on the amount of output per unit of labour input, while unit wage costs are based on the labour cost of producing a unit of output.
All these measures are published for the whole economy, the manufacturing sector and agricultural sector, but some are also published for the service sector, and some at a more detailed industrial sector level, notably for manufacturing. Market sector productivity is also published.
Productivity series are also published at the regional level and in comparison with other G7 countries. While these series use the same definitions as above, they use different data sources to ensure consistency and comparability.
ONS also publish experimental series and related articles on multifactor productivity, and the necessary components of capital services (VICS) and quality adjusted labour input (QALI).
Technical Data
UK productivity series are calculated using:
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gross value added (GVA) from the National Accounts
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worker, jobs and hours data from the Labour Force Survey (LFS), and
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Reporting Unit (RU) based jobs data at industry level from the Workforce Jobs survey (WFJ) – constrained to LFS total jobs
A number of adjustments are made to the underlying data to ensure consistency, for example, quarterly data are seasonally adjusted, raw survey data are ‘grossed up’ to UK aggregates, and the like. See the Productivity First Release background notes for more detail or the productivity methodological article.
Market Sector estimates exclude public sector services.
Regional productivity estimates are produced annually, and are at the Government Office Region level. They are published in the Productivity First Release once a year. The Office for National Statistics (ONS) and Department of Environment, Food and Rural Affairs (DEFRA) have produced estimates of productivity at a more detailed regional level in order to examine differences in rural and urban productivity.
International Comparisons of Productivity (ICP) is produced and published by ONS, but is based on OECD macroeconomic data and Eurostat and OECD Purchasing Power Parities, which are used to convert international data to a consistent basis; a form of exchange rate. ONS base the current price comparisons around the UK, so that the UK is set equal to 100 with the other counties’ productivity levels converted in relation to the UK. However, for the constant price, or growth, comparisons of all countries productivity levels are set equal to 100 in 1991, with growth rates stemming from that year.
There are a number of data release and methodology publications on the ONS website, which can be accessed through the productivity page
In 2007, ONS published the ONS Productivity Handbook which describes the range of productivity estimates, compares different methods of assessing productivity, outlines and reviews methodological aspects of productivity estimates and the components that are used to derive productivity estimates, and so on. An extensive glossary of productivity related terms can be found in the Productivity Handbook
Glossary
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Capital services (VICS)
The stream of services that are drawn from a stock of capital, as opposed to the capital stock itself. It is arguably the stream of capital services that contribute to productivity growth, rather than the stock of capital itself.
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G7 countries
Group of seven countries, made up of the US, Canada, Japan, Germany, France, Italy and the UK.
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Gross value added (GVA)
The additional value generated by any unit engaged in production, over and above the value of the inputs to that production. It can also be defined as the difference between total output and intermediate consumption for any given sector or industry. It is measured at basic prices, excluding taxes less subsidies on products.
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Index number
A measure of the average level of prices, quantities or other quantifiable characteristics relative to their level for a defined reference period or location. It is usually expressed as relative to 100 (for example, 105 would be an increase of 5 per cent) where 100 is the value for the reference period or location.
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Industrial classification/breakdown
This is the internationally standardised method for classifying the extensive range of industrial sectors in an economy. At the highest level, the economy can be divided into the market sector and the public sector. It can then be broken down into nine sections, and each section can be broken down into further sectors and subsectors.
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Labour costs
In the employed sector, this is largely made up of wages and salaries, but there are some other components that are added to wages and salaries to make up ‘Compensation of Employees’. These other components include other forms of remuneration such as national insurance or pension contributions. For the self-employed sector, it is not possible to attribute income specifically to labour or to capital, so the returns to labour and capital are grouped into one term called ‘Mixed Income’. However, for some productivity measures, notably unit wage costs, it is necessary to derive an estimate for the returns to self-employed labour. This is done by assuming that the proportions of either hours worked or returns to labour are the same in the self-employed sector as they are in the employed sector.
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Labour input
In terms of input to productivity measures, this is the flow of productive labour.
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Labour Market Statistics (LMS)
A measure of many different aspects of the labour market that provide an insight into the economy. They are also very much about people, including: their participation in the labour force; the types of work they do; earnings and benefits they receive; their educational qualifications; and their working patterns.
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LFS (Labour Force Survey)
An ONS survey of households in Great Britain and Northern Ireland that provides information about people’s employment status and conditions. It asks individuals about their current and previous jobs including which industries they work in, which jobs they hold within the industry and how many hours they work. It also enquires about related topics such as training, qualifications, income and disability.
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Local Unit (LU) employees
The industrial classification of the local unit of an enterprise is used to classify employee jobs, rather than the ‘reporting unit’ industrial classification. This is particularly relevant when an enterprise has numerous local units in more than one industrial function and in more than one geographical region. For example, a supermarket may provide pharmaceutical services, insurance and various other services besides selling supermarket-related goods and services, predominantly food and other domestic or household goods.
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Market sector
Part of the economy that is ‘traded’ in or through some form of a market, and therefore, not the public sector.
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Multifactor productivity
This is also termed ‘total factor productivity’. This is an alternative, more complex, method of estimating productivity growth. A wider range of factors of production are taken into account, rather than just labour, with the growth that is not attributed to growth in capital or labour (or other factors of production or intermediate inputs) being productivity growth.
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Productivity
The ratio between what is obtained (output) and what is put in to obtain that output (input). It provides an indicator of the efficiency, competitiveness and underlying ‘potential growth’ of an economy. At its simplest and most frequently used, labour productivity refers to the amount of output per unit of labour used, whether that labour is defined as workers, hours worked or jobs. A more complex measure of productivity is multifactor, or total factor, productivity, which attributes increases in output to a range of inputs, such as labour and capital, and potentially other forms of input, with the remaining increase in output being attributed to ‘productivity’.
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Productivity hours
This is the productivity jobs series, that is, adjusted from local unit (LU) to reporting unit (RU) level and industrial classification, multiplied by hours worked for that industry from the Labour Force Survey.
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Quality adjusted labour input (QALI)
Since labour, or workers, is not homogenous, this methodology enables labour input to be adjusted to take account of qualifications, age (proxy for experience), gender and industrial sector. However, this methodology, or series, is only used in the estimation of multifactor productivity, in which output growth is attributed to factors of production leaving productivity residual, and not the Office for National Statistics (ONS) standard labour input productivity estimates.
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Reporting unit (RU) employees
Indicates that the industrial classification of the reporting unit of an enterprise is used to classify employee jobs, rather than the local unit industrial classification. RU-based jobs in aggregate is the sum of RU employees plus HM Forces plus Government Supported Trainees plus self-employed. For the employee jobs component, an enterprise with local units in a number of sectors will take the industrial classification of the reporting unit.
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Service sector
This is the part of the economy that is involved in providing or delivering services, rather than making or producing physical goods or outputs. It is made up of a very wide range of services, including wholesale and retail services, hotels and catering, transport and communications, financial and business services, recreational services, public services which includes education, health, social services and defence. It is distinct from the other sectors of the economy – agriculture, fishing and forestry, mining, construction and manufacturing.
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Unit Wage Costs
Indicates the cost in labour terms of producing a unit of output. This is another way of assessing productivity.
Contact Details
For statistical enquiries about this topic, please contact:
Jon Gough
Email: productivity@ons.gsi.gov.uk
Telephone: +44 (0) 16 3345 6720
Employment, Earnings and Innovation directorate Office for National Statistics Cardiff Road Newport NP10 8XG
