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Frequently Asked Questions
What is an index series?An index series is simply a way of expressing, in percentage terms, the change in some variable from a given point in time to another point in time. For example, let's say that output increased by 10 percent from an initial year (1987) to a subsequent year (1988). The index for our arbitrarily chosen base year of 1987 would be 100.0 while the index for 1988 would be 110.0. Conversely, if output had declined in 1988 by 10 percent, the 1988 index value would be 90.0. Why don't we measure productivity for particular groups, such as white collar workers, or geographical areas?BLS productivity measures are based on aggregate national measures of outputs and inputs. These data sources do not provide the information BLS would need to construct occupational, regional, or state measures. There are also conceptual obstacles to disaggregating these national measures. For example, the output of a factory may require both white collar and blue collar inputs, and it is therefore unclear how to allocate the output to the two groups separately. Is output in your output per hour measure for the business sector equal to Gross Domestic Product (GDP)?Business sector output is based on GDP, but includes only a subset of the goods and services included in GDP. The business sector comprises about 80 percent of GDP since it must exclude those portions of the economy for which productivity measures cannot be constructed. General government, the output of the employees of nonprofit institutions and private households, and the rental value of owner-occupied real estate are excluded. How are labor hours calculated?The primary source of hours and employment data is the BLS Current Employment Statistics (CES) program, which provides data on total employment and average weekly hours of production and nonsupervisory workers in nonagricultural establishments. For the quarterly productivity measures, the Hours at Work Survey is used to convert the CES hours to hours at work by excluding all forms of paid leave. In manufacturing, average weekly hours for nonproduction workers are developed from BLS studies which provided data on the regularly scheduled workweek of white-collar employees. For nonmanufacturing sectors, all employees are assumed to work the same hours as nonsupervisory employees. Because CES data include only nonagricultural wage and salary workers, data from the Current Population Survey (CPS) are used for farm employment as well as for nonfarm proprietors and unpaid family workers. Government enterprise hours are developed from the National Income and Product Account estimates of employment combined with CPS data on average weekly hours. For the industry productivity measures, for manufacturing industries, the nonproduction worker hours are developed, similar to the quarterly measures, from BLS studies, which provided data on the regularly scheduled workweek of white collar workers. For nonmanufacturing industries, supervisory worker average weekly hours are a constant and total hours vary according the changes in employment. What is included in compensation?Compensation is a measure of the cost to the employer of securing the services of labor. It includes wages and salaries, supplements (like shift differentials, all kinds of paid leave, bonus and incentive payments, and employee discounts), and employer contributions to employee-benefit plans (like medical and life insurance, workmen's compensation, and unemployment insurance). The measures of compensation published alongside the productivity measures include an imputation of the earnings of the self-employed. This is because the output of proprietorships is included in our output measures. When data are provided quarterly, is the percent change for the year equal to the average of the percent changes for the four quarters?The percent change for the year should closely approximate the average of that year's four quarterly percent changes from the corresponding quarter of the preceding year. Because the percent change values presented in the official data are rounded to one decimal point, and because of minor variations in the year to year values used for seasonal adjustment of the quarterly data, results of a calculation based on press release data will reflect a small difference between the percent change for the year and the average of the quarterly percent changes from the preceding quarter a year ago. The percent change for the year is NOT equal to the average of that year's four quarterly percent changes from the previous quarter of the same year. The quarterly percent changes calculated from the previous quarter of the same year do not capture information on the year to year movement of the index number. Why aren't all the percent changes I calculate from your index numbers the same as those in the press release?The index numbers published by BLS are rounded to one decimal point for convenience. Sometimes rates of change computed using rounded indexes will differ from those computed from the underlying source data. Also, the quarter-to-quarter percent changes are reported at an annual rate. Consequently, differences of several tenths of a percentage point may occur between rates of change computed from the BLS published index numbers compared to those computed from the BLS source data. Why does the BLS revise the measures?BLS measures of productivity and costs are based on underlying series from a variety of sources. These data sources are frequently revised as additional data become available. When any of these underlying series is updated or revised, the productivity and costs measures are revised to reflect the new information. What is the revision schedule for the quarterly labor productivity and costs measures?Generally, a recent quarter of data is revised twice after its initial release. Historical revisions occur when the source data used in their construction are revised. Because many of these sources are revised independently, the productivity measures undergo frequent revision. Revisions to source data include the following: Output and compensation data: A three-year revision is generally incorporated into the August press release. This revision occurs when the Department of Commerce revises the National Income and Product Accounts. Employment and hours data: A five-year revision is generally incorporated into the August press release. This revision occurs when the Bureau of Labor Statistics benchmarks the national establishment employment data. Hours at work data: This revision affects one or two years of data and is generally incorporated into the early November press release. This revision occurs when the Bureau of Labor Statistics' Hours at Work Survey for the previous calendar year has been tabulated. Manufacturing output data: This revision affects a variable number of years and occurs on a somewhat variable schedule. This revision occurs when the Board of Governors of the Federal Reserve Board revise their data. Revisions also occur due to changes in data from the Census and Annual Surveys of Manufactures and to the input-output tables prepared by the Bureau of Economic Analysis. How are changes in output measured for specific industries?Different products are aggregated into one output measure by weighting (multiplying) the relative change in the output of each product by its share in the total value of output. Thus, the products that require more resources to produce are given higher weight. For tangible products such as tons of steel, developing an output index series and ultimately a productivity series seems not to be too difficult. How are measures developed for those industries where data on quantities produced are not available? How do you, for example, measure the output of barbershops?If data were available on the number of haircuts, shaves, etc. performed, these data could be used just as we would have used data for tons of steel. We might weight haircuts and shaves differentially, but the concept is the same. Generally, data for the quantities of output produced or the number of times a service has been performed are not available. However, an alternate methodology is available. Barbershops may not know how many haircuts, etc. have been performed, however, they will know how much revenue they have received from these services. Changes in revenues reflect changes in both quantity of output and its price. Price changes are removed by dividing an index of revenue by a price index, the remainder being an index of quantity. Does outsourcing and offshoring of intermediate production inflate the productivity measures?In the business sector, outsourcing to domestic nonmanufacturing industries and offshoring to foreign businesses alter the distribution of production among firms. Since firms can differ in their productivity, domestic outsourcing can affect business sector productivity if the contracting firm differs in its productivity from the outsourced production. Similarly, offshoring can affect business sector productivity if the productivity of the production lost to offshoring differs from the productivity of remaining and any new U.S. business sector production. Any effect of offshoring on business sector productivity change is expected to be modest. Outsourcing and offshoring have the potential for greater effect on labor productivity at the industry level. In manufacturing, outsourcing and offshoring have contributed about 1.5% per year to sectoral output per hour growth between 1973 and 1995. Their contribution has slowed to only about 1% per year thereafter and as a result they do not appear to be an explanation for the productivity speed-up in manufacturing. Further discussion can be found in "The Effect of Outsourcing and Offshoring on Productivity Change" (PDF).
Last modified: March 29, 2004 |
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