Statistical bulletin: International Comparisons of Productivity - First Estimates, 2011

International Comparisons of Productivity - First Estimates, 2011

• Output per hour in the UK was 15 percentage points below the average for the rest of the G7 industrialised nations in 2011, the widest productivity gap since 1995. On an output per worker basis, UK productivity was 20 percentage points lower than the rest of the G7 in 2011.
• In 2011, UK output per hour grew roughly in line with the average for the rest of the G7, and faster than the US and Germany. But UK output per worker was broadly flat in 2011, compared with growth for the rest of the G7.
• Since the start of the recession in 2007, growth of UK output per hour has trailed that of the US, Japan and Canada, but has been similar to that of other major European economies.
• Over this period, UK output per worker has fallen by a cumulative three percentage points. This is the weakest of all G7 economies apart from Italy.

About this release

This bulletin contains annual estimates of labour productivity for the G7 developed countries (Canada, France, Germany, Italy, Japan, UK and USA) up to 2011. Labour productivity measures the amount of current price and constant price (that is, 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 total hours worked and by numbers of workers in employment. 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 current price 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 (246.1 Kb Pdf) explaining the uses and limitations of PPPs is available on our website.

The estimates in this release update estimates to 2010 published on 6 March 2012 and provide first estimates for 2011. This release cycle reflects the publication and revision cycles of the component data series.

Interpreting these statistics

The labour productivity measures in this bulletin are presented in terms of current prices, suitable for cross-country comparison of levels for a single year, and constant prices, suitable for analysis of productivity growth over a number of years. The current price estimates in Tables 1 and 2 should be read horizontally, while the constant price estimates in Tables 3 and 4 should be read vertically.

Current price productivity estimates 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. And the current price productivity estimates should not be used to analyse productivity trends 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, or some combination of these movements.

Constant price productivity estimates are indexed to a particular year. For each country, these estimates are almost identical to national labour productivity series (minor differences from national sources are described in the Background Notes to this bulletin). In this release the index year has been changed from 2004 to 2007 in order to focus on movements in labour productivity over the recession.

Constant price productivity estimates show the evolution over time of productivity for each country and for the G7 (and G7 excluding the UK) aggregates, but should not be used to compare productivity at a point in time. Changes in constant price productivity can be decomposed into changes in output minus changes in labour inputs, and these components can move in different directions within and across countries. This should be borne in mind in interpreting the constant price productivity estimates in this release.

More information on methodology and interpretation is available in the Background Notes to this bulletin. Additionally, a Quality and Methodology paper for this release provides information on the quality of the estimates in this release, as well as providing a summary of methods used in compiling the output.

Current price productivity

Current price productivity estimates allow for comparison of how much economic output is produced by each worker and hour worked across countries in a particular year, relative to the UK=100.

Gross Domestic Product (GDP) per Hour Worked (Table 1)

First estimates for 2011 show that UK per hour worked was:

• above that of Japan,

• similar to that of Canada and Italy,

• significantly below Germany, France, the US and the average of the G7 countries excluding the UK.

Figure 1: Current price GDP per hour worked

Source: Office for National Statistics

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Comparing 2011 with 2010, the UK productivity shortfalls relative to Italy, Germany, France and the US all widened. Canada’s shortfall in productivity has been closed, and the productivity difference between the UK and Japan narrowed by four percentage points. The difference in productivity between the UK and the rest of the G7 widened by two percentage points and was the largest since 1995.

GDP per worker (Table 2)

On this basis, UK productivity in 2011 was:

• above that of Japan,

• lower than that of all the remaining G7 countries,

• lower than the US by the greatest margin since 1990, when this series begins.

Figure 2: Current price GDP per worker

Source: Office for National Statistics

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Comparing 2011 with 2010, the shortfall between UK labour productivity on a per worker basis and the rest of the G7 widened by four percentage points. Against the US, the productivity difference widened by five percentage points (the largest annual change on record), while the gap over Japan narrowed to the smallest margin since 1996.

As illustrated in Figure 3, there are significant differences in average hours worked across the G7, reflecting cultural and compositional differences between economies.  These differences account for differences in the patterns of productivity in Figures 1 and 2. 

Comparing 2011 with 2010, the largest change in average hours was in the UK, where average hours fell by around 1.5 percentage points, perhaps partly reflecting special factors such as the Royal Wedding in April 2011. In addition, there has been a shift towards part-time employment according to UK labour market statistics.

Figure 3: Average hours per worker

Source: Office for National Statistics

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Constant price productivity

In this release, constant price productivity series are indexed to 2007=100 and show the evolution of labour productivity over time for each separate country and for the G7, and G7 excluding the UK, aggregates.

Figure 4: Constant price GDP per hour worked, selected G7 countries

Index 2007=100

Source: Office for National Statistics

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Figure 5: Constant price GDP per worker, selected G7 countries

Index 2007=100

Source: Office for National Statistics

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A striking feature of Figure 4 (GDP per hour) and Figure 5 (GDP per worker) is the difference in productivity trajectories over recent years between the main European economies on the one hand and the US and Japan on the other hand.

In 2011 US GDP was around one percentage point higher than in the pre-recession year of 2007, whereas US employment was some four percentage points lower and US hours worked were around five percentage points lower. Hence US labour productivity in 2011 was some 5-6 percentage points above 2007 levels.

By contrast, UK GDP was 2.4 percentage points lower in 2011 than in 2007, while UK employment was 0.3 percentage points higher, hence the fall in UK output per worker between 2007 and 2011. Total hours worked fell by 2.8 percentage points in the UK over this period, reflected in output per hour regaining its 2007 level in 2011. The weakness of UK labour productivity over this period has been referred to as the "productivity conundrum" and is discussed further in this ONS article.

In 2011, productivity growth was similar in the UK and Germany.  But GDP growth in Germany was 3.0 per cent compared with only 0.8 per cent in the UK, with correspondingly different movements in labour inputs.

Revisions

Data covering the entire period 1990 to 2010 have been subject to revision in this release since the previous publication on 6 March 2012. The main sources of revisions are as follows:

• Small revisions to PPP exchange rates for Japan for 2009 and 2010.

• Revisions to GDP estimates for the UK from 1990 onwards, reflecting revised measurement of insurance services, in line with Eurostat requirements, see Improvements to Blue Book 2012: Measurement of insurance services. For example, in 2010 UK current price GDP has been revised upwards by 0.2 per cent, and UK constant price GDP has been revised upwards by 1.1 per cent.

• Revisions to GDP estimates for other countries (apart from Canada) in 2009 and 2010, reflecting updated information.

• Major revisions to French employment and working hours for the whole period 1990-2010. More information on these revisions.

• Downward revisions to UK employment over the period 1993-2003.

• Revisions to annual hours for Germany and the UK over the whole period.

Tables R1 to R4 of this release compare the latest estimates up to 2010 with the estimates from the previous release on 6 March 2012. Revisions arise from a combination of revisions to the input data cited above.

Notes for Revisions

1. Note that because Tables 1 and 2 are indexed to 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.

Background notes

1. 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.

2. Quality and methodology

   A revised and updated Quality and Methodology paper for this release was published on 20 July 2012.  This paper describes the intended uses of the statistics presented in this publication, their quality, and the sources and methods used to produce them. The paper also provides information on the uses and limitations of international comparisons of productivity.

   The output measure used here (GDP) differs from that used for the ONS headline measure of labour productivity (Gross Value Added (GVA)). 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. As the OECD does not produce output series using basic prices over the necessary time period, and PPP exchange rates are implicitly based on market prices, GDP is used in this bulletin.

3. Other data on productivity

   ONS publishes a quarterly Labour Productivity statistical bulletin.  This provides more detailed information regarding UK labour productivity than this release.

   ONS also publishes experimental estimates of multi-factor productivity (117.3 Kb Pdf)  (MFP), which decompose output growth into the contributions that can be accounted for by labour and capital inputs. In these estimates, the contribution of labour is further decomposed into quantity (hours worked) and quality dimensions. 

   Lastly, ONS publishes a range of public sector productivity measures and related articles. These measures define productivity differently from that employed in the ONS labour productivity and MFP estimates. Further information can be found in Phelps (2010) (252.5 Kb Pdf) .

   More information on the range of ONS productivity estimates can be found in the ONS Productivity Handbook. 

   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 3 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 estimates use 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 estimates use the Annual National Accounts with results in national currency, whereas ONS uses the Quarterly National Accounts for GDP data.

   More international data on productivity are available from Eurostat, and the Conference Board.

4. User engagement

   ONS is keen to develop a greater understanding of the use made of international comparisons of productivity statistics.  If you have something to tell us, please use the feedback form on ONS productivity statistics available at: http://www.ons.gov.uk/ons/guide-method/method-quality/specific/economy/productivity-measures/productivity-articles/index.html

   ONS is organising a Productivity Statistics User Group Workshop in early 2013. If you are interested in attending please email: Productivity@ons.gsi.gov.uk.

   You can follow ONS on Twitter: www.twitter.com/statisticsons and Facebook: www.facebook.com/statisticsons and watch our videos at www.youtube.com/onsstats

5. Next publication date

   Final estimates for 2011 will be published in February 2013.

6. Details of the policy governing the release of new data are available by visiting www.statisticsauthority.gov.uk/assessment/code-of-practice/index.html or from the Media Relations Office email: media.relations@ons.gsi.gov.uk

   These National Statistics are produced to high professional standards and released according to the arrangements approved by the UK Statistics Authority.

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