Below are the first 10 and last 10 pages of uncorrected machine-read text (when available) of this chapter, followed by the top 30 algorithmically extracted key phrases from the chapter as a whole.
Intended to provide our own search engines and external engines with highly rich, chapter-representative searchable text on the opening pages of each chapter.
Because it is UNCORRECTED material, please consider the following text as a useful but insufficient proxy for the authoritative book pages.
Do not use for reproduction, copying, pasting, or reading; exclusively for search engines.
OCR for page 3
Introduction,
Findings, and
Recommendations
INTRODUCTION
During the past several years, there has been a great deal of concern about
the performance of the American economy, particularly about productivi-
ty. Measured output per hour of all persons engaged in production in the
private business sector has been rising much less rapidly in the past decade
than it did in the two previous decades. This apparent slowdown in
productivity growth causes serious concern for several reasons. A
slowdown would mean a slower rate of growth in real income per capita
in the standard of living. A slowdown in productivity growth could also
contribute in important ways to the problem of the current high and
persistent rate of inflation and to the imbalance in international payments.
However, it was not the main purpose of the Panel and of this report to
discuss either the causes or the consequences of the apparent slowdown in
productivity growth; our task was rather to consider the measurement of
productivity.
Whenever any measure of economic performance becomes a source of
concern, several sets of questions naturally arise. First, just what does the
measure really mean? What are the underlying concepts? How well are
they understood and used by economists, public officials, journalists, and
the public? Second, how accurate and timely are the measures? What are
the sources of error in them? How, if at all, can errors be reduced or
eliminated? If one is to recommend policies to deal with a slowdown in the
3
OCR for page 4
4
REPORT OF THE PANEL
measured rate of productivity growth, it is important to be sure that the
measures are reasonably accurate, just as one would want to be sure before
treating a patient for fever that the patient's temperature had been taken
with an accurate thermometer. Third, what additional data should be
collected to improve the measure? It is to these questions that this report is
addressed.
The Panel's first charge was to consider the major purposes for which
productivity statistics are used and to recommend the most appropriate
concepts to achieve those purposes. The Panel was to recommend how
productivity might best be defined in the actual measurement process. The
Panel was charged specifically with appraising present methods, identi-
fying gaps, suggesting appropriate statistical methodology, and recom-
mending new directions for research for statistical compilation. In
carrying out this large assignment, the Panel decided to concentrate its
attention on the statistical measurement of productivity as a tool for
monitoring and promoting efficient production of goods and services. The
Panel's work thus is directly related to the concepts of the national
economic accounts, while broader welfare issues were considered more
briefly. (For a fuller discussion of welfare issues, see Moss [in this
volume].)
Several members of the Panel have had previous experience as members
of groups dealing with the relevance and accuracy of other sets of
economic statistics. We have found the evaluation of productivity
measures more difficult in one respect than that of most other economic
statistics. Very few of the data used for productivity measures are collected
for that purpose. Rather, most productivity measures are composites of
other measures and data collected from a wide variety of sources for many
different kinds of uses. The task of reviewing productivity measures thus
comes uncomfortably close to that of reviewing the entire body of
economic statistics collected by the federal government. Clearly, we could
not do that task with the time and resources at our disposal. We have had
to select what seemed to us to be the crucial aspects, and some may
disagree with our selection.
Nor did we want to duplicate the work of other groups that have
reviewed in greater depth some of the components of productivity
measures. Instead, we refer to their work where it is relevant and on
occasion endorse some of their recommendations where they are applica-
ble to our task. In particular, we do not discuss in this report the measures
of productivity in agriculture produced by the U.S. Department of
Agriculture; those measures are being reviewed by a task force of the
American Agricultural Economics Association.
We begin in Chapter 2 with a discussion of the uses, misuses, and
OCR for page 5
Introduction, Findings, and Recommendations
limitations of productivity measures. This discussion provides an introduc-
tion for those without much previous exposure to the measurement of
productivity. Chapter 3 reviews the basic concepts underlying the
measures of productivity used by government agencies and by private
researchers. It extends the nontechnical exposition of these concepts as
presented in Chapter 2 by introducing the concept of a production
function and by deriving some of the basic statistical formulas used in
productivity measurement.
Chapter 4 reviews the present official measures of productivity. This
review is intended to be factual and descriptive and to serve as background
to the rest of the report. Some problems raised by existing measures are
mentioned, but the main body of evaluation and criticism is reserved for
later chapters.
Chapters 5 and 6 are in a sense the heart of the report: they contain
most of our discussion of shortcomings in existing measures and possible
ways of improving them. Chapter 5 discusses the measurement of output,
the numerator of the productivity ratio. The first part of Chapter 5
establishes criteria for the inclusion or exclusion of specific types of
activity in the measure of output used in measuring productivity; the
second part discusses problems presented by changes in the quality of
output.
5
Chapter 6 discusses the measurement of inputs (labor, capital services,
and intermediate inputs), one or more of which make up the denominator
of the productivity ratio. The problems in measuring labor input include
the appropriate concept of hours of work and whether labor input should
be differentiated by some measure of its composition, such as skill,
experience, or education. The problems of measuring the input of capital
services include the treatment of depreciation, obsolescence, and changes
. . .
In Inventories.
Chapters 7 through 9 deal with three important special aspects of
productivity measures: the ways in which measures can be used to make
inferences about the possible sources of changes in productivity (Chapter
7~; the measurement of productivity at the level of the individual plant or
company (Chapter 8~; and international comparisons of productivity
(Chapter 9~.
Throughout the report, we have made recommendations where we
thought them appropriate. These recommendations and our major findings
comprise the rest of this chapter. Most of our recommendations are
addressed to the agencies of the federal government that prepare
productivity measures or supply the data that enter into them. Some of
these recommendations are intended to improve existing productivity
measures; others would broaden their scope.
OCR for page 6
6
FINDINGS AND RECOMMENDATIONS
REPORT OF THE PANEL
This section contains a summary of the principal findings and all the
recommendations of the Panel. Each recommendation is followed by a
reference to the chapter or chapters of the report and, in some cases, a
paper in this volume, that contain a fuller explanation of the findings and
the evidence.
The order of the findings and recommendations follows the order of the
chapters from which they are drawn. Therefore, the recommendations are
not listed in order of priority. Although there have not been any explicit
dissents from any of the recommendations, it should not be assumed that
every member of the Panel agrees with every statement in the report or
with every recommendation. A supplementary statement to the Panel's
report by Markley Roberts follows Chapter 9.
The Panel has not attempted to estimate the cost of implementing its
recommendations, both because this task was not included in its charge
and because it does not have access to the information needed to do so. In
thinking about the possible costs of implementing the recommendations,
the reader should keep in mind that almost all of the recommendations
would have benefits broader than improving productivity measures and
would also help to improve other parts of the federal statistical system.
THE PRESENTATION AND INTERPRETATION OF PRODUCTIVITY
MEASURES
Changes in the Bureau of Labor Statistics (BES) measures of output per
hour of labor input are subject to misinterpretation by users, who may
incorrectly associate changes in these measures solely with the changing
skill and effort of the work force. Output per hour is also affected by
changes in technology, the capital/labor ratio, changes in inputs of
intermediate goods, rates of capacity utilization, and many other factors as
well as by the interaction of these factors.
The BES now publishes cautionary statements warning users not to
attribute changes in output per hour to labor alone, but these statements
appear only in the annual bulletin on productivity for detailed industries
and in selected articles in the Monthly Labor Review. Such statements do
not appear in the quarterly releases on productivity measures for broad
sectors of the economy, which are the measures most closely followed by
the press.
OCR for page 7
Introduction, Findings, and Recommendations
Recommendation 1. The Panel recommends that the Bureau of Labor
Statistics give more prominence in its publications and press releases
to cautionary statements warning against misinterpretation of its
output-per-hour measures. (Chapter 2)
7
Output-per-hour measures are constructed from many data sources,
some of which become available only after preliminary, and even later,
productivity measures have been published. The incorporation of addition-
al data from these sources is the reason that published estimates of output
per hour are revised. Occasionally, these revisions are large, as is shown in
De Sha (in this volume). To give users some idea of the reliability of early
measures of output per hour, it may be useful to provide them with an
estimate of the possible size of expected revisions on the basis of past
experience.
Recommendation 2. The Panel recommends that the Bureau of Labor
Statistics study the size, direction, and other characteristics of past
revisions in estimates of output per hour and, on the basis of its
findings, consider publishing in its press releases a range of probable
revisions (based on historical experience) for the preliminary esti-
mates. (Chapter 4 and De Sha)
Even after the final revisions are made, incorporating the most reliable
and comprehensive sources of information available, a certain margin of
error remains in the estimates of output per hour. This error may be due to
incomplete coverage of data sources, inaccurate reporting, sampling error,
and the like. Existing techniques for estimating the distribution of the
overall margin of error rely heavily on the opinions of experts those who
prepare or study the estimates-concerning the distribution of the errors
in various components of the index. The feasibility of using these methods
is examined in Holland and King (in this volume). Further study of the
overall error in productivity measures and the sensitivity of overall error to
reductions of error in components of the measures will aid in setting
priorities for improving the measurement of those components.
Recommendation 3. The Panel recommends that the Bureau of Labor
Statistics and the Bureau of Economic Analysis explore methods for
estimating the implications of error reduction in component measures
for the reduction of overall error in productivity measures beyond
that corrected by routine revisions. (Chapter 4 and Holland and
King)
OCR for page 8
8
MEASUREMENT OF OUTPUT
REPORT OF THE PANEL
There are two important criteria for measuring output for use in
productivity ratios: data on output and inputs should be taken from the
same universe, and output and inputs should be measured independently
of each other. The scope of the output measure used in the current official
measure of productivity in the private business sector, for the most part,
satisfies these criteria. The aggregate measure excludes some large and
growing sectors for which there is as yet no satisfactory way to measure
output independently of inputs, such as general government and not-for-
profit institutions. However, it includes some sectors for which estimates
of the change in real output are estimated either entirely or mainly from
changes in inputs, including finance and insurance and portions of the
services and construction sectors. About 5 percent of the current official
productivity output universe does not meet the second criterion. It would
be valuable, though difficult, to develop satisfactory ways to measure
output directly in these questionable areas.
A major problem in measuring output stems from changes in quality.
Real output is usually measured by deflating the current-dollar value of
output by a price index. To be an appropriate deflator, this index must
distinguish changes in prices that correspond to changes in quality from
true price changes. Current techniques make that distinction when the
changes in quality result from changes in costs of production, but those
techniques are not adequate for dealing with changes in quality that do not
result from changes in costs.
Recommendation 4. The Panel recommends that the Bureau of
Economic Analysis (BEA) and the Bureau of Labor Statistics (BES)
seek to improve their existing price indexes and to develop auxiliary
measures of price change. These new auxiliary measures should take
into account more adequately the types of quality change that are not
now measured. They should be a collaborative effort of BEA and the
productivity and price research divisions of BES.
Among the adjustments that could be incorporated in the new
measures are adjustments (through better linking procedures) for
changes in value to users resulting from the introduction of improved
products; estimates of the value to users of improvements in
performance that are achieved without increases in real costs; and
estimates of the present value of future savings in operating efficiency
made possible by design changes and improvements.
Since many of the proposed adjustments would require background
studies and additional research, they could not all be incorporated
OCR for page 9
Introduction, Findings, and Recommendations
simultaneously into a single new output measure to be used for
productivity analysis. Instead, the output measure could be revised
periodically, perhaps every 5 years, as new research evidence becomes
available on the importance of unmeasured quality change both in the
current and in the previous periods. (Chapter 5)
9
Observers have criticized the output measure used in existing productiv-
ity measures from yet another point of view, saying that it attempts to
measure only changes in welfare that operate through the goods and
services sold in the market and therefore that it does not measure many
important changes in welfare. Some of these changes are directly related to
the economic system; for example, the costs of relocating workers laid off
because of technological change and the environmental damage done by
industrial pollution. Others, like changes in health and safety, while less
closely related to the economic system, are clearly of great importance.
The Panel concludes that at present the scope of official productivity
measures should be restricted to sectors in which changes in real output
can be adequately measured. In addition, the Panel thinks that it is
important to develop separate output measures for sectors now excluded
from the private business sector or from gross national product (GNP).
The largest GNP sector excluded from productivity measures is general
government. For the federal government, BES has developed productivity
measures that cover about 65 percent of the federal civilian work force;
these measures are not used to expand the output measure for the private
business sector, however, because of their limited coverage and the
difficulty of defining the outputs of federal agencies. For state and local
governments, private researchers have developed measures of output and
productivity for some of the more readily identifiable services, such as
police protection and education.
Another major GNP sector excluded from the broadest productivity
measures is not-for-profit institutions, principally private not-for-profit
hospitals and colleges and universities. It may be possible to measure
outcomes and productivity for some of these institutions. Scott (in this
volume) finds that the use of more inputs by hospitals leads to higher-
quality outcomes in some dimensions of their output, such as reduction in
postsurgical mortality rates. However, other organizations, such as schools
and churches, that lack empirically demonstrable techniques of production
use instead what may be termed socially validated techniques.
A major area of non-market activities not covered by GNP is home
production, which includes child care, meal preparation, and home repairs
by owners. The BEA, which prepares GNP estimates, is now beginning to
OCR for page 10
10
REPORT OF THE PANEL
develop estimates of the value of home production. The BEA iS also seeking
to estimate environmental pollution and other external effects.
Recommendation 5. The Panel recommends that research on the
measurement of the output and productivity of the resources in
excluded sectors be expanded. However, there should be no prema-
ture selection or foreclosing of any of the alternative measures of
output for such systems as health care and higher education.
Although progress has been made in measurement in these areas, we
do not yet know enough about the operation of such systems either to
measure precisely their salient outcomes or to assume that we
understand the processes that account for them. (Chapter 4 and
Scott)
There is growing recognition that the interpretation of productivity
measures could be enhanced if more attention were given to quality-of-life
issues. Quantitative data from federally funded research by BEA'S
Environmental and Nonmarket Division, studies of social indicators, and
work on goals accounting are intended to broaden our understanding of
many critical aspects of productivity change not fully covered in the
existing framework of economic measures. This broadening of understand-
ing does not require that data on the quality of life be incorporated into the
measures of output and productivity now in use.
Recommendation 6. The Panel concludes that many useful analyses
of economic and social welfare issues can be undertaken within the
framework of output and input used in the current official measures.
However, the Panel does agree that for the study of many important
social problems for example, improvement of the health status of
the population-definitions of output and input that go well beyond
those currently used to measure productivity are required. The Panel
believes that for each of these special problems, partial and special
measures of output and input should be developed when possible.
However, the Panel concludes that it is not now possible to add or
subtract such special measures from the conventional measures of
output and productivity to construct a meaningful single index of
overall welfare for the nation. (Chapter 5 and Moss)
OCR for page 11
Introduction', Findings, and Recommendc~tior~s
MEASUREMENT OF INPUTS
Labor Input
11
The current official measure of labor input is the unweighted sum of labor-
hours in all the enterprises whose output is included in the numerator of
the productivity measure. Although this measure is satisfactory for many
purposes, it supers from some drawbacks. First, for a substantial fraction
of the work force, nonproduction and supervisory workers, there are no
direct data on hours. Second, the current official measure of hours of
employees uses data on hours paid for rather than hours spent at the
workplace to measure changes in labor input. Hours paid for include paid
leave as well as hours spent at the workplace, and the ratio of hours at
work to hours paid for has been gradually falling. Finally, the official
measure, since it is an unweighted sum of hours, does not take into
account the effect on measured productivity of changes in labor composi-
tion, such as changes in skill, education, and experience.
Recommendation 7. The Panel recommends that the Bureau of Labor
Statistics develop an annual supplement to the current employment
statistics (CES) program requesting data on the actual hours of
nonproduction and supervisory workers. (Chapter 6)
Recommendation 8. The Panel concurs with the recommendation of
a 1976 BES task force that recommended that a separate annual
survey of hours at the workplace be administered to a subsample of
the establishments currently responding to the CES. (Chapter 6)
Recommendation 9. The Panel recommends that the Bureau of Labor
Statistics devote more resources to studying the use of weighted labor
input measures. The purpose of this effort would be the preparation of
one or more weighted measures of labor input for broad aggregates of
economic activity, such as the private business sector. Such weighted
labor input measures could be used alone and could also be used in
combination with measures of capital input to measure changes in
multi-factor productivity. Both of these measures could help in
explaining the changes in the single-factor unweighted measure of
labor productivity. (Chapter 6 and Kunze)
OCR for page 12
12
Capital Input
REPORT OF THE PANEL
There are now no official published measures of single-factor productivity
other than those for labor input. Single-factor measures of inputs of capital
services are needed to improve our understanding of the causes of
productivity change in the economy.
Capital stock estimates, which are needed to derive estimates of inputs
of capital services, are already prepared and published by the BEA, using
the perpetual inventory method. These require data on investment
expenditures (including inventories), capital goods prices, and estimates of
the length of life of capital goods. These perpetual inventory estimates are
not currently reconciled with book-value data and are not available jointly
cross-classified by functional group (e.g., buildings, trucks, etc.) and
industry.
Recommendations have been made in the reports of the Wealth
Inventory Planning Study and the GNP Data Improvement Project of ways
to improve capital stock and input estimates. On the basis of these reports,
the Panel endorses several recommendations that will substantially
improve capital estimates to be used in productivity measures.
Recommendation 10. The Panel recommends that the Census Bu
reau, in its quinquennial economic censuses and annual economic
surveys, collect data on beginning and end-of-year inventories by
method of valuation. The censuses and surveys should also provide
fuller coverage and greater detail on capital outlays, book values of
.
invested capital (gross and net of depreciation), and on depreciation
allowances and retirements. The data should distinguish major types
of equipment by major industry. The Panel also recommends that a
sample survey of the age distribution of fixed assets, by type, and of
retirements, by age, during the previous year be taken in order to keep
current the retirement factors used in estimating capital stocks.
(Chapter 6)
Recommendation 11. The Panel recommends that government agen-
cies make use of available estimates of real capital stocks to develop
ratios of output per unit of capital in order to determine the savings
that have been achieved over time in physical capital per unit of
output. (Chapter 6)
OCR for page 13
Introduction, Findings, and Recommendations
Intermediate Inputs
13
Intermediate inputs are purchases of goods and services by one firm or
industry from another that are used up in current production. Productivity
changes at the individual firm or industry level can be due to increases in
efficiency in the use of intermediate inputs as well as in the use of labor and
capital. Good measures of changes in both the quantity and quality of
intermediate inputs are needed to identify the industrial sources of
productivity change. If measures of intermediate inputs are not available,
measurement of industry productivity must rely on total output per unit of
labor and capital, which can reflect both productivity change and
substitution between intermediate inputs and labor and capital.
For most nonmanfacturing industries, current data gaps preclude the
direct measurement of intermediate inputs (see Chapter 4~. For the
industries in which intermediate inputs are measured directly (e.g.,
manufacturing), deflators are constructed from information on the product
mix of purchased inputs from input-output tables that may be outdated.
This problem is important because the mix and amount of intermediate
inputs used per unit of output can change sharply in an economy subject to
rapid technological change.
Recommendation 12. The Panel recommends that the Census Bureau
in its periodic reports on real gross output for detailed industries
based on successive quinquennial censuses, include estimates of the
real amount of intermediate purchases of materials, including energy,
for those detailed industry categories for which data are available.
(Chapters 4, 5, and 6 and Myers and Nakamura)
Recommendation 13. The Panel recommends that, in order to
improve the quality of the annual measures of industry productivity,
the Census Bureau augment the Annual Survey of Manufactures (and
other annual surveys) to include subcategories of the materials input
categories. (Chapters 4 and 6 and Myers and Nakamura)
Recommendation 14. The Panel endorses the recommendation of the
GNP Data Improvement Project calling for the Census Bureau to
collect, as an integral part of each economic census, data on the
purchases of intermediate services as well as materials by establish-
ments. (Chapters 4 and 6 and Myers and Nakamura)
OCR for page 14
14
Multi-Factor Productivity Measures
REPORT OF THE PANEL
By combining two or more measures of inputs (capital, labor, and
intermediate purchases) by some appropriate weighting scheme and
dividing this combined measure of inputs into a measure of output, one
can obtain a multi-factor productivity ratio. Changes over time in this
ratio measure the net savings in the use of inputs per unit of output that
are brought about by technical change and other sources of productivity
growth.
Multi-factor productivity measures are useful in a number of ways.
They help in understanding changes in output per unweighted labor-hour.
If the growth rate in the multi-factor measure is less than that of the
single-factor labor-hour measure, we know that some of the increase in the
labor-hour measure is due to increases in the amount of other inputs per
unweighted labor-hour.
Multi-factor measures are also useful in monitoring and studying the
sources of output growth other than those from inputs including
technical change, managerial innovations, and improved resource alloca-
tion. Changes in the growth rates of multi-factor productivity measures are
due entirely to these non-input sources.
Recommendation 15. The Panel recommends that the Bureau of
Labor Statistics experiment with combining labor and other inputs
into alternative measures of multi-factor productivity. (Chapter 6)
MEASUREMENT OF THE SOURCES OF PRODUCTIVITY CHANGE
Existing research projects on sources of productivity growth, which are
almost all done by private researchers, take a long time to complete. If
they were done quickly, they would be unreliable. Thus, there is often a
long lag between the occurrence of important changes in the official
productivity measures (output per unweighted labor-hour) and the
appearance of well-documented analyses of these changes, even in terms of
forces that are relatively easy to measure, such as changes in the
capital/labor ratio and various dimensions of work-force composition.
OCR for page 15
Introduction, Findings, and Recommendations
Recommendation 16. The Panel recommends that the Bureau of
Labor Statistics and the Bureau of Economic Analysis take joint
responsibility for developing and maintaining measures of some of the
sources of growth (such as changes in physical capital and work-force
composition) so that policy makers can have timely and accurate
information on at least the more easily measurable sources of
productivity change. (Chapter 7)
15
Although the existing research on the sources of productivity change
provides useful knowledge about the broad patterns of contributions to
growth, it tells us relatively little about its more detailed aspects and
patterns. How do the various inputs and the non-input sources interact
with one another (for example, the rate of capital investment and the rate
of embodied technical change)? What is the relative importance of new
product and service innovation, whose output ejects are hard to measure,
in total innovation? How representative is the existing evidence on the
social rate of return to investments in research and development? How do
institutional (legal, political, social, cultural) factors affect productivity
change in various industries and in the economy?
Recommendation 17. The Panel recommends that government agen-
cies support research aimed at improving knowledge about the
sources of productivity change. These agencies should be especially
attentive to research that focuses on measuring technical and
organizational change and new product and service innovation. The
Panel also recommends funding micro-level studies of the returns to
research and development. Micro-level studies of innovations in
personnel management and other organizational behavior should also
be encouraged. (Chapter 7)
INTERAGENCY COOPERATION AND COORDINATION
Several federal agencies collect basic economic data from establishments
on the value of shipments, hours of employees, and prices of commodities
and services sold. These basic data should be comparable because they are
combined into secondary measures of output, hours, and productivity for
industries and larger aggregates. Since by law the Census Bureau cannot
share its Standard Statistical Establishment List a directory of all
establishments by industry the basic data are taken by samples from
different universes and are not strictly comparable.
OCR for page 16
16
REPORT OF THE PANEL
Recommendation 18. The Panel supports legislation that would allow
the Census Bureau to share with other federal statistical collection
agencies the Standard Statistical Establishment List, so that all those
agencies could sample from a common universe, making the basic
economic data more comparable. (Chapter 8)
Either because of legal restrictions or because of provisions regarding
confidentiality for companies providing data voluntarily, the federal
statistical agencies seldom interchange data. Unfortunately, the result of
this lack of coordination is duplication of data collection and the
underutilization of existing information within the federal government.
Recommendation 19. The Panel stresses the urgency of finding a
solution to the problem of coordinating data collection and allowing
data interchange among the federal statistical collection agencies for
statistical and research purposes, in such a manner that the rights,
benefits, or privileges of individual respondents are not violated.
(Chapter 8)
Several agencies of the federal government prepare estimates of output
for identical sectors of the economy. These estimates sometimes diverge
widely because the agencies use different concepts and data sources or
different procedures for deflation and weighting. For recent benchmark
years, substantial differences were found in the four estimates of output in
the pulp and paper industries prepared by BEA, the Federal Reserve Board
(FRB), BES, and the Census Bureau (see Myers and Nakamura in this
volume) and between the indexes of output of manufacturing industries
prepared by FRB and BEA (see Popkin in this volume).
Reconciling differences between output measures may shed further light
on measurement problems and on observed changes in productivity. The
agencies involved should therefore try to determine the sources of
differences in their estimates.
Recommendation 2a The Panel recommends that the relevant
agencies try to reconcile their different output measures that cover the
same industry or sector to improve the measures and to acquire a
better understanding of measurement problems associated with
weighting, deflation, and other procedures. This can be achieved by
strengthening the existing mechanisms in government that bring the
agencies together, such as committees formed by the Once of Federal
Statistical Policy and Standards. (Chapter 8 and Myers and Naka-
mura)
OCR for page 17
Introduction, Findings, and Recommendations
INTER-FIRM COMPARISONS
17
Many companies in the United States measure their productivity and use
these measures for finding ways to reduce costs, to plan future production,
and to keep track of their long-run performance. In many other countries,
companies participate in industry-wide productivity comparison programs
that permit them to assess their performance vis-a-vis their competitors.
Productivity measures add a new dimension to the financial information
that managers typically rely on.
Recommendation 21. The Panel recommends that companies investi-
gate whether having measures of productivity would improve their
performance, planning, and evaluation. It encourages the U.S.
Department of Labor and the U.S. Department of Commerce to
continue to inform companies of the potential benefits of productivity
measurement programs. (Chapter 8)
INTERNATIONAL COMPARISONS OF OUTPUT AND PRODUCTIVITY
Reliable comparisons of national income and product levels in different
countries are a prerequisite for international comparisons of productivity
levels. The widely published comparisons of output of different countries
obtained by converting the nominal value of output (expressed in yen,
marks, dollars, etc.) by use of exchange rates are virtually meaningless.
Meaningful comparisons require comparing the prices of similar goods and
services in all countries for a given year. The International Comparisons
Project (~cP) has made such comparisons for several industrialized and
developing nations for 1970 and 1973. This project is particularly
successful because of its association with the United Nations and its
contact with the national governments concerned.
Recommendation 22. The Panel recommends continued and increas-
ing support for the work of the International Comparisons Project,
along the lines suggested by the Statistical Office of the United
Nations. We recommend that international organizations provide the
financial support necessary to implement the proposals and urge U.S.
representatives to these organizations to support the proposals.
(Chapter 9)
The ice data do not permit comparisons of output or productivity at the
detailed industrial level. There have been some international productivity
comparisons by industry, but they are limited in the number of industries
OCR for page 18
18
REPORT OF THE PANEL
or countries covered. The next logical step in expansion of the ice is
industry estimates for industrial nations, for which these comparisons are
most meaningful. Perhaps the ice will soon be able to expand its research
in this direction.
In this country the analysis of international productivity differences has
been largely the work of private researchers supported by federal agencies.
Direct research by the agencies has been confined in the postwar period to
rather simple compilations of series on output per worker, or per hour, for
manufacturing, farming, and steel.
Explanation of international productivity differences also requires study
of institutional factors, including social, cultural, and political factors, as
well as economic conditions. This could become an important field of
research for researchers in many disciplines.
Recommendation 23. The Panel endorses continued support for
private research on international productivity comparisons, with
some enlargement of its scale as opportunities for useful projects arise.
The Panel also believes that research within government should be
expanded along lines to be determined by the relevant agencies and
adjusted on the basis of their experience. As an important component,
we suggest, once the Bureau of Labor Statistics and the Bureau of
Economic Analysis have established a program to provide growth
accounting series on a regular basis for the United States, they extend
their series to other industrial countries. (Chapter 9)
Representative terms from entire chapter:
labor statistics
