This bulletin contains annual estimates of labour productivity for the G7 developed countries (Canada, France, Germany, Italy, Japan, UK and USA) up to 2010. Labour productivity measures the amount of real (inflation adjusted) economic output that is produced by a unit of labour input, and is a key measure of economic performance. Output is measured by gross domestic product (GDP). Labour input is measured in two ways – by numbers of workers in employment, and by total hours worked. These two measures of labour input can yield different results, reflecting differences in working patterns across countries and compositional movements over time, such as a shift towards part-time working.
Comparability across countries is achieved by converting local currency based measures of GDP using purchasing power parity (PPP) exchange rates. PPP exchange rates (usually referred to simply as PPPs) attempt to equalise the cost of a representative basket of goods and services in countries with different national currencies. An ONS article explaining the uses and limitations of PPPs (246.1 Kb Pdf) is available on our website.
The estimates in this bulletin update those published on 20 September 2011. This release cycle reflects the publication and revision cycles of the component data series.
The labour productivity measures in this bulletin are presented in terms of levels, suitable for cross-country comparison at a point in time, and growth, suitable for analysis of productivity performance through time.
Productivity levels are indexed to UK=100 for each year and show each country’s productivity relative to that of the UK in that year. Since productivity is a key determinant of living standards, these estimates also provide an indication of living standards relative to the UK. In interpreting these estimates users should bear in mind that PPPs provide only an approximate conversion from national currencies and may not fully reflect national differences in the composition of a representative basket of goods and services. Also, care needs to be taken in interpreting trends in levels of productivity over time. For example, an increase in UK productivity relative to another country could be due to UK productivity growing faster, or falling less, or due to changes in relative prices in the two countries.
Productivity growth estimates are indexed to a particular year, in this case 2004. For each country, these estimates are almost identical to national productivity series (minor differences from national sources are described in the Background Notes to this bulletin). Productivity growth estimates show the evolution of productivity for each country and for the G7 aggregate, but should not be used to compare productivity at a point in time.
More information on methodology and interpretation is available in the Background Notes to this bulletin.
The level of productivity allows for comparison of how much economic output is produced by each worker and hour worked in different countries at a point in time.
Final estimates for 2010 show that UK GDP per worker was:
Above that of Japan,
Similar to that of Canada and Germany,
Lower than that of Italy, France and the USA, which continues to lead the G7 countries,
Lower than the average of G7 countries excluding the UK.
Between 2009 and 2010, UK labour productivity on a per worker basis was unchanged relative to the G7 excluding the UK. The UK’s productivity shortfall compared with the USA increased by two index points while the shortfall compared with Italy narrowed by five index points, although the change relative to Italy largely reflects relative price movements between the countries.
The level of GDP per worker in 2010 was 35 index points higher in the USA than in the UK. This is the largest gap since 1993, and a widening of 10 index points since 2006, reflecting more pronounced reductions in employment in the USA during the global recession.
On this basis, UK productivity in 2010 was:
Above that of Japan,
Similar to that of Italy and Canada,
Below France, Germany, the USA and the average of the G7 countries excluding the UK.
UK labour productivity on an hourly basis was 12 index points (equivalent to 11 percentage points) lower than the G7 excluding the UK in 2010. This is a little lower than the shortfall on a per worker basis, reflecting lower average hours in the UK than other G7 countries, particularly the USA and Italy. However, the UK’s shortfall on this measure has increased by six index points since 2006, reversing a long period over which the shortfall had narrowed. And the productivity shortfall has widened against all other G7 countries since 2006. On a per hour worked basis the productivity gap, in 2010, between the UK and the USA was at its widest since 1995 (24 index points) though it is smaller than the gap on a per worker basis.
The measurement of hours used in this bulletin is the product of average hours worked per worker and total employment. The UK was the only G7 country to experience a fall in average hours per worker between 2009 and 2010. As demonstrated by figure 3, the average number of hours worked relative to the UK increased for all the other G7 countries between 2009 and 2010.
In 2010, the average number of hours worked in Germany was low relative to the UK. As the level of GDP per hour worked in Germany (119 index points) was high relative to the UK this suggests that the average worker in Germany was more productive per hour. However, on average each worker in Germany worked fewer hours, therefore the amount of GDP generated by the average worker in the UK and Germany (103 index points) was similar. This picture is reversed in countries where average hours worked are higher than in the UK, such as Italy and Japan. In the USA, average hours are higher than in the UK and workers are more productive per hour. There are various influences on the average number of hours worked per worker across the world including part time working, job sharing, preference and flexibility of working patterns, illness and holidays.
Productivity growth series are indexed to 2004 and show the evolution of labour productivity over time for each country and for the G7 as a whole.
All G7 countries, including the UK, experienced growth in GDP per worker in 2010, reflecting a bounce-back from the global recession in 2008 and 2009. UK productivity growth was among the lowest of the G7 countries by this measure, while Japan, France and the USA experienced faster productivity growth.
The USA is the only country in the G7 not to experience a fall in GDP per worker during the global recession. Over the same period (2007 to 2009) the UK experienced a similar fall to Germany, Italy and Japan as employment initially fell more slowly than GDP.
All of the G7 countries demonstrated positive growth in GDP per hour worked in 2010. The UK growth in GDP per hour worked resulted from a combination of a fall in average hours worked per worker (which is multiplied by employment to calculate total hours) and an increase in GDP. Employment rose slightly in the UK in 2010.
On this measure of productivity the UK’s cumulative growth over the period 1991 to 2004 exceeded that of all other countries under comparison. However, between 2004 and 2010, growth in GDP per hour worked for the UK was slower than the average of the G7 countries excluding the UK.
Data covering the period 1990 to 2010 have been subject to revision in this Bulletin. This is due to revisions to the following input data sources:
Revisions to purchasing power parity (PPP) estimates for Canada and Japan from 2003 onwards, and France, Germany, Italy and the UK from 1990 onwards.
Revisions to GDP at current prices (unadjusted for inflation) for Germany and Italy from 1990 onwards and the UK from 1997 onwards.
Revisions to GDP at constant prices (adjusted for inflation) for all countries from 1990 onwards.
Revisions to GDP at constant prices arise partly due to a change in the OECD reference year from 2000 to 2005. For Canada, France and the USA growth rates in these series have not been revised and so the results are not affected. Values of GDP for the UK since 1997 have also been revised since the previous release. These revisions were incorporated as part of Blue Book 2011 and are explained in the Quarterly National Accounts Q2 2011.
The level of total employment in France used in 2010 is taken from Eurostat. This figure is revised downwards since the previous release.
Note that because Tables 1 and 2 are indexed to the UK = 100, revisions to the UK are zero by definition. Thus, revisions to other countries may represent a combination of revisions to UK data and other countries’ data.
The revisions tables (35 Kb Excel sheet) compare the latest data with the data from the previous release on 20 September 2011. Revisions arise from a combination of revisions to the input data cited above. Overall, the revisions mentioned above have led to a fall in the level of productivity in the UK relative to all other countries in 2008, 2009 and 2010 and relative to Japan for the entire series (see tables R1 and R2 (35 Kb Excel sheet) ). Growth in UK productivity has been affected throughout the series due to revisions in the growth rate of constant price GDP explained above (see tables R3 and R4 (35 Kb Excel sheet) ). Otherwise the results show no substantial revisions.
This Statistical Bulletin
ONS publishes annual estimates of International Comparisons of Productivity twice a year. Initial estimates are published approximately nine months after the reference year, with final estimates published approximately five months later. Exact publication dates vary subject to the availability of the input datasets.
Further information on the quality of ICP statistics, including their strengths and limitations in relation to use and potential use can be found in the Summary Quality Report (123.8 Kb Pdf) . This will shortly be replaced on the Guidance and Methodology pages by a Quality and Methodology Information paper.
ICP estimates are published to the nearest whole number. However, differences of a few percentage points between the productivity estimates for individual countries should not be seen as significant because of the difficulties in obtaining directly comparable data across countries.
For ICP measures of productivity growth, data for all countries are indexed to equal 100 in 2004, enabling comparisons of productivity growth relative to this reference period for any given year. The year 2004 has been selected as the reference period as it corresponds with a low discrepancy between the UK and G7 productivity levels, and allows clearer comparison within the most recent periods.
To derive an index for each country relative to the UK (=100) in terms of productivity levels, the derived labour productivity measure for each country in each year is divided by the UK estimate for that year and multiplied by 100. Numbers in excess of 100 indicate that productivity is higher in that country compared to the UK. Numbers below 100 indicate that productivity is higher in the UK. Indices are published as they are more intuitive and more presentable. However, if the productivity of the UK changes then it will affect the relative performance of other countries; if only the UK’s productivity were to increase then the relative performance of other countries would fall.
International comparisons of productivity levels use purchasing power parities (PPPs), which measure the relative price of a basket of goods and services across countries. Since this representative basket of goods and services changes over time, ICP measures of productivity levels are only suitable for point in time comparisons, and should not be used for time series or growth analysis.
Data sources for this bulletin are as follows: GDP from the OECD Main Economic Indicators, February 2012; Purchasing Power Parity (PPP) estimates from the OECD PPP web site (updated continuously); employment from the OECD Annual Labour Force Statistics, January 2011; average hours worked from OECD Employment Outlook, July 2011.
Due to a break in the series currently available from the OECD, UK employment and hours data have been derived directly from the latest Labour Force Survey data, following the OECD method of compilation.
The OECD does not yet have a value for total employment in France in 2010. The statistics presented use the latest level of total employment in France as reported by Eurostat. This is in line with the practice adopted in the autumn release.
The output measure used here (GDP) differs from that used for the ONS headline measure of productivity (Gross Value Added (GVA) [LINK]). The difference between these measures is that GDP uses market prices and GVA uses basic prices, which exclude taxes and subsidies and trade and transport costs and trade and transport costs. As the OECD does not produce output level series using basic prices over the necessary time period, and the rates of purchasing power parity (PPPs) are based on market prices, GDP is used in this bulletin.
The OECD also publishes growth of GDP per hour worked. for the G7 and two other aggregates, the EU and OECD. These OECD estimates can be compared with the series in table 4 of this bulletin. The differences between the ONS and OECD series are not large. They can be explained by the different sources used for the component data. In particular, ONS estimates use employment data that are based on countries’ labour force surveys, whereas the OECD uses the National Accounts as the main source of employment data for most countries. There are also slight differences in the GDP data, as the OECD uses the Annual National Accounts with results in national currency, whereas ONS uses the Quarterly National Accounts for GDP data.
GDP data for each country in local currency prices are converted using PPPs to make them internationally comparable. GDP at purchasing power parity is effectively a relative volume measure of GDP. Dividing this by either an employment or total hours worked measure produces a labour productivity estimate.
To compare growth rates of productivity between countries constant PPPs are used. Using the constant PPP approach is not necessary for calculating volume growth for any given country, but is necessary for calculating growth for the G7 group as a whole. These measures fix GDP at purchasing power parity to a base year for each country, and extrapolate forwards and backwards by applying annual volume growth rates of output in each country to produce measures comparable between countries. This allows for intertemporal analysis, as only volume changes are captured in the ICP data – otherwise price increases in an economy could be confused with an increase in output and productivity.
For this release the base year for PPPs is 2008, which is the latest year for which the OECD PPP series have been benchmarked.
For further details about the international comparisons of productivity methodology, the compilation process, and a detailed analysis of past revisions, see the International Comparisons of Productivity Guidance & Methodology Page.
Further details on the measurement of productivity can be found on the Productivity Measures Guidance and Methodology page. Other information on productivity can be found in the ONS Productivity Handbook and the OECD Productivity Manual.
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A guidance and methodology section is now available on the ONS website, providing a hub for quality, methodology and other information.
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