OECD Compendium of Productivity Indicators 2019

Labour productivity in manufacturing

The manufacturing sector has historically been the main driver of aggregate productivity growth in most economies. While its contribution to aggregate productivity growth has become less important in recent years, it remains a key driver of productivity growth.

Key findings

The post-crisis slowdown in labour productivity growth in manufacturing has been widespread, spanning nearly all sub-sectors of manufacturing from higher-tech, higher skilled activities such as computers and electronics to those traditionally viewed as lower-tech and lower-skilled, such as textiles. Labour productivity growth slowed significantly in the Czech Republic, Lithuania, Poland, Sweden and the United States, in the former and in Belgium, the Czech Republic, Greece, the Slovak Republic, Slovenia and the United Kingdom in the latter.

Definition

Labour productivity is calculated as the ratio between each sector’s value added and the total number of hours worked. For Japan, Latvia, Mexico and the United States, in the absence of national accounts data on total hours worked by manufacturing sector, the total number of persons employed (employees and self-employed) is used as a measure of labour input.

Comparability

Volume estimates of value added in ICT-producing sectors (such as manufacturing of computer, electronic and optical products) are complicated by challenges in measuring output prices of the activities, and in particular, how these capture quality improvements associated with technological advances. The use of hedonic deflators is generally considered as the best way to address these problems. However, comparisons of price movements of ICT goods (and also services) point to significant differences in price measurement across countries (Ahmad et. al, 2017), which although not significantly impacting on whole economy productivity estimates can have an impact on more detailed sectoral analyses.

References

Ahmad, N., J. Ribarsky and M. Reinsdorf (2017), “Can potential mismeasurement of the digital economy explain the post-crisis slowdown in GDP and productivity growth?”, OECD Statistics Working Papers, No. 2017/09, OECD Publishing, Paris, http://dx.doi.org/10.1787/a8e751b7-en.

OECD National Accounts Statistics (database), http://dx.doi.org/10.1787/na-data-en.

Schreyer, P. (2002), “Computer prices indices and international growth and productivity comparisons”, Review of Income and Wealth, Number 1, Series 48.

Figure 3.3. Labour productivity in manufacturing, selected sectors

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