Measurement and Interpretation of Productivity (1979) / Chapter Skim
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4 Government Measures of Productivity: Concepts, Mehtods, and Sources
4 Government Measures of Productivity: Concepts, Mehtods, and Sources
Pages 50-87
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From page 50... ...
Following a brief overview of government measures, the rest of this chapter is divided into sections on each of the major classifications of the economy for which official productivity measures are prepared: economywide, industry divisions, selected detailed industries, and the federal government. The last section, "Omissions from Existing Measures," deals with sectors and external effects not covered in any official Pleasures of productivity.
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From page 51... ...
. For measuring productivity at high levels of aggregation (e.g., the private business sector)
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From page 52... ...
The current official program only publishes measures for specific industries when the concepts and data permit relatively good measures. Because there is also a need for productivity measures that cover broad sectors of the economy, BES has a program of measures covering the private business sector and major industry divisions.
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From page 53... ...
ECONOMY-WIDE MEASURES The most inclusive productivity measure regularly published quarterly and annually by BES iS real output of the private business sector per unweighted hour of all workers. Figure 4-1 shows the trend since World War II in this measure.
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From page 54... ...
BEA uses data from a large number of sources to estimate income and product. REAL OUTPUT The numerator of the private business sector series is derived from measures of the gross national product (GNP)
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From page 55... ...
Gross national product 1,235.0 1,217.8 1,202.1 1,274.71,337.5 Less: rest of world 7.6 6.8 4.9 6.77.4 Gross domestic product 1,227.4 1,211.0 1,197.2 1,268.01,330.1 Less: government 138.9 141.9 144.6 145.8147.5 Gross domestic private product 1,088.5 1,069.1 1,052.6 1,122.21,182.6 Less: households and institutions 38.1 38.0 38.9 40.241.4 Gross domestic business product 1,050.4 1,031.1 1,013.7 1,082.01,141.2 Less: Gross product of owner-occupied housings 71.0 74.5 79.0 83.286.1 Less: "residual" 4.9 5.3 5.6 5.21.7 Bureau of Labor Sta tistics numerator (private business sector) 974.5 951.3 929.1 993.61,053.4 aBureau of Economic Analysis (1977)
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From page 56... ...
The following section, which is devoted to measures for industry divisions, describes the data and procedures used by BEA to measure real gross product originating by industry.8 The BEA procedure for estimating domestic business product in constant dollars involves two steps. First, BEA estimates output in current dollars from data on business sales to the major categories of final demand: personal consumption expenditures (PCE, 72.2 percent)
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From page 57... ...
The discussion above relates to estimation of output in current dollars; to measure output in constant dollars, BEA deflates the current-dollar data. For the large part of PCE that involves direct and explicit money transactions between consumers and private business firms (about 80 percent of PCE)
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From page 58... ...
58 o 50 C,3 V7 ._ as ._ V3 o o C,3 Cal ._ Cal ·5 a: Cal C~ ._ ._ o Cal Cal Cal 3 o V)
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From page 59... ...
When the constant-dollar measures of change in inventories and net exports are added to the estimates described above, the result is BEA'S official gross domestic business product in constant dollars (see Office of Federal Statistical Policy and Standards 1977, Chapters 5 and 8~; BES subtracts the constant-dollar value imputed to the services of owneroccupied dwelling units to arrive at the numerator of its measure of productivity for the private business sector. LABOR INPUT The concept of labor input used by BLS iS the unweighted sum of the hours of all workers engaged in the production of the output measured in the numerator of the productivity ratio.
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From page 60... ...
Private business sectora 100.0 Manufactunngb 29.3 Production workers C CES CES 20.8 Nonproduction workersC assumed constantd CES 8.0 Self-employment CPS CPS 0.5 Nonmanufactunuge 63.8 NonsupervisoryC'f CES CES 46.0 Supervisory workersC same as nonsupervisory CES 7.9 Self-employed CPS CPS 9.2 Unpaid family workers CPS CPS 0.7 Government enterprises CPS BEA 2.2 Farm-all employees CPS CPS 4.7 CES = Consumer Expenditure Survey, CPS = Current Population Survey, BEA = Bureau of Economic Analysis. aNot-for-profit institutions are excluded from measures of the private business sector, so the Bureau of Labor Statistics subtracts their hours from those of the entire sector.
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From page 61... ...
For nonproduction workers, hours are assumed to be constant at their 1962 level; for supervisory workers, hours are assumed to equal those of nonsupervisory workers in the same industry. In 1977, about 16 percent of the labor input in the productivity measure for the private business sector was based on assumptions about hours worked rather than direct measurement.
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From page 62... ...
Since the procedures for estimating labor input by industry division are essentially identical to those used for the private business sector, our description of sources and methods is also limited to those used for measuring real output. DATA SOURCES AND ESTIMATING METHODOLOGY For the numerator of the measures of productivity by industry division, BES uses the BEA measures of real gross product originating (GPO)
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From page 63... ...
can also be measured from data on the incomes of the factors in the given industry and on the non-factor costs of production (e.g., excise taxes paid. To measure changes in real value added or gross product originating, BEA uses the method of "double deflation" for about half the industry divisions and other procedures for the rest.
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From page 64... ...
There are other 5-digit product classes and 7-digit products within SIC 2 7 3 1 and 2 7 3 2. SOURCE: Bureau of the Census (1972)
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From page 65... ...
BEA then deflates the current-dollar value of the wherever-made shipments of 5-digit primary product classes, using estimates of the 7-digit product mix of each 5-digit product class based on information from the latest available quinquennial census. The current- and constant-dollar values of all the 5-digit product classes primary to a 4-digit industry are summed and used to make an implicit deflator to apply to the currentdollar value of the industry's total shipments.22 After deflation, the measures of constant-dollar shipments for each of the 450 industries are summed to the 2-digit industry level.23 The same type of deflation procedure is applied to data on the value of the current purchases of materials.
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From page 66... ...
The remaining 13 measures cover 27 percent of the employment in the other sectors. Although BES publishes productivity measures only for industries for which it has reliable output and input indexes, it maintains 551 unpublished productivity measures covering all 2-, 3-, and 4-digit sac manufacturing industries.
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From page 67... ...
. For the detailed industry program, BES prepares its own measures of real output, primarily from Census Bureau and PP~ data, and uses measures of labor input based primarily on data from the same Census Bureau survey that provides the data on the value of shipments and inventories in current dollars.
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From page 68... ...
Cigarettes, chewing and smoking tobacco Cigars Hosiery Sawmills and planing mills (general) Paper, paperboard, and pulp mills Corrugated and solid fiber boxes Synthetic fibers Pharmaceutical preparations Paints and allied products Petroleum refining Tires and inner tubes Footwear Glass containers Hydraulic cement Structural clay Clay construction products Clay refractories Concrete products Ready-mixed concrete Steel Annual Output Index Benchmarked to Census Levelsa QU QV QU QU QUb QU QVH QVH DWH QV/QH/DW/DWHC QH/DWH DW QV DW DW DwHc DwHc QVC DWH QVH QV QUC QUC QU QVHC DWH QVH/DWHd QV QH DWH QH QVH QVH QH QV QV DWH DwHc DWH DWC DW QH Yes (QU)
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From page 69... ...
Subcomponents combined using employee-hour, labor cost, or gross margin weights. aUnless noted in parentheses, the initial stages in benchmark construction utilize data on price change for individual products from the Bureau of Labor Statistics and from the Bureau of the Census to develop constant-dollar primary product class quantity indexes.
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From page 70... ...
If adequate unitvalue weights are not available, the current value of each 7-digit product is deflated with a matching BLISS producer price index.25 The primary product quantity indexes are then divided into the current-dollar value of the primary products to obtain wherever-made implicit price deflators for the 5-digit product classes. Second, these deflators are applied to the current
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From page 71... ...
Annual Output Measures For some manufacturing industries, physical quantity data by product group are obtained from trade associations and other sources, along with appropriate unit-value or unit labor requirement weights. The product categories are not as detailed as in the quinquennial censuses but are detailed enough for measuring annual changes in real output.
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From page 72... ...
For most industries, retail sales data are deflated for industry components and combined to the industry level using employee-hours, employment, laborcost, or gross-margin weights. Data on physical quantity for most manufacturing industries come from the Current Industrial Reports, the Census Bureau, or trade associations.
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From page 73... ...
For purposes of the BES measures of labor productivity, a change in product quality refers to a change in product characteristics that reflects an altered production process requiring different base-period labor input. Changes in characteristics that affect the value of the output to the user but do not result from an altered production process having different base-period labor requirements are not incorporated in the current BES measures.
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From page 74... ...
For the private business sector, identifying final product is relatively simple: it is sales to final-demand categories (households and government) and sales of investment goods to firms.
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From page 75... ...
It looks at final output from the point of view of the individual agency and tries to identify readily measurable output for these units, regardless of how far removed they are from the flow of final services. Using this approach, the BES since 1974 has regularly published productivity measures for 20 functional areas within the federal government and an overall measure for the agencies in its sample (see Table 4-7~.
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From page 76... ...
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From page 77... ...
77 ~ ~ o _ ~ CO oo .
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From page 78... ...
; patent application examination. Functional Grouping Military base services and military training Activity Output Indicator Deflated dollar value of sales; pieces processed Number of meals served; students enrolled Student-years trained Number of active duty accounts maintained; number of time cards processed Number of invoices and travel claims processed; bills mailed Obligation and expenditure documents processed; checks paid and reconciled and tax deposit forms processed Number of cases closed Number of new standards and modifications completed Number Inspections made Number of consumer complaints processed Number of new animal drug applications; application disposed DOT = Department of Transportation; GSA = General Services Administration; CAB = Civil Aeronautics Board; USIA = U.S.
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From page 79... ...
There are differences of opinion about whether productivity measures can be used to improve the current measure of real output for the federal government in the national accounts. BEA'S current method of measuring government output assumes that no productivity change takes place in the public sector; therefore, BES must exclude this sector in calculating its aggregate productivity measure.
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From page 80... ...
There is an important difference between state and local governments and the federal government in the potential for developing productivity measures that could be used to expand the economy-wide productivity measures, namely, that most activities of state and local governments deliver final services directly to taxpayers. This makes it possible to measure quantities of those final services.
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From page 81... ...
Much of the work (like that of the BES program for federal agencies, described above) is aimed at helping not-for-profit organizations improve their own efficiency rather than at developing measures that would permit comprehensive comparisons of productivity change between these sectors and the private business sector.
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From page 82... ...
Despite the widespread interest in non-market uses of time, there has as yet been no systematic effort by government agencies to develop data series that measure the utilization and productivity of non-market time, either of time used in conjunction with purchased goods and services or of time used to purchase goods and services. There is one nongovernmental project of sufficient size and scope that it may produce information about the productivity of non-market time although it is not directly aimed at measuring productivity change.
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From page 83... ...
The data currently available primarily cover the resource costs that firms have incurred in meeting specific environmental standards imposed by regulatory agencies. Although these data alone do not allow for the computation of a comprehensive productivity ratio of the kind discussed above, they can be used to correct conventional productivity measures for the erects of requiring the firm to shift partially into the production of some favorable environmental output.
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From page 84... ...
Our discussion focuses on the measures for the private business sector.
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From page 85... ...
and a deflated-value index using price indexes with base-year quantity weights. BEA divides the current-dollar value of expenditures into individual product classes and
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From page 86... ...
20. Primary products are the 5-digit product classes or 7-digit products listed under an industry in the Census Bureau's Numerical List of Manufactured Products (Bureau of the Census 1972; see Table 4-5~.
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From page 87... ...
24. In connection with output measures based on the quinquennial censuses, it should be noted that the Census Bureau publishes a volume showing real output indexes for all 4-digit manufacturing industries (U.S.
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