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Input Measures: Labour and Capital

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Consistency within productivity estimates, for both labour and multi-factor measures, is of primary importance and requires coherent output and input data. For labour productivity, this means labour input, workers, jobs or hours worked and for multi-factor productivity (MFP) this means both labour and capital inputs. These inputs are quality-adjusted labour input (QALI) measures and the volume index of capital services (VICS).

QALI measures not only hours worked as labour's input into production but also approximates workers' marginal productivity, using their characteristics to adjust hours worked. VICS captures the flow of services that stem from the physical capital stock and are used in the production process, taking account of changes in the mix of assets and their useful value. By taking account of known improvements in inputs, these measures produce more accurate estimates of productivity growth.

This chapter reviews current methodologies and considers the importance of consistency within productivity estimates and the challenges that this provides. The chapter describes how the Office for National Statistics (ONS) ensures that coherent output and input measures are available. Specific attention is paid to ONS work to reconcile the estimates of labour input.

The chapter also describes the two new inputs ONS has developed for calculations - QALI and VICS.

Content from the Office for National Statistics.
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