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Performance of multifactor productivity
in the steel and motor vehicles industries
For many decades, the Bureau of Labor Statistics has published indexes of output per hour, or labor productivity, for specific industries. It now provides these measures for approximately 150 industries.1 Movements in output per hour indexes reflect changes in capacity utilization, the composition of the labor force, and technology; economies of scale; research and development; and the substitution of other factors for labor.
A new BLS index, multifactor productivity,2 relates output to the combined input of capital and intermediate purchases (materials, fuels, electricity, and services) as well as of labor. The movement of this index represents the change in output not accounted for by the directly measurable inputs. The difference between the movement of the multifactor productivity measure and the output per hour measure indicates the impact of changes in the amount of capital services per hour (capital-labor ratio) and the amount of intermediate purchases per hour (intermediate purchases-labor ratio) on output per hour.
This article focuses on the relationship between output per hour and multifactor productivity in the steel and motor vehicles industries. The performances over time of both measures are used to examine the post-1973 slowdown in output per hour in the steel industry (SIC 331). This slowdown coincided with the productivity slowdown that occurred in the major sectors of the economy. The motor vehicles industry (SIC 371) did not experience much of a post-1973 slowdown in output per hour, but the measures help explain that industry's performance. Concepts and methods of deriving the output per hour and multifactor productivity measures are explained in the appendix.
This excerpt is from an article published in the August 1987 issue of the Monthly Labor Review. The full text of the article is available in Adobe Acrobat's Portable Document Format (PDF). See How to view a PDF file for more information.
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1 For the latest indexes, see Arthur Herman, "Productivity gains continued in many industries during 1985," Monthly Labor Review, April 1987, pp. 48-52.
2 See Jerome A. Mark and William H. Waldorf, "Multifactor productivity: a new BLS measure," Monthly Labor Review, December 1983, pp. 3-15.
Related Monthly Labor Review articles
Multifactor productivity in the metal stampings industry.—May 1995.
Multifactor productivity in manufacturing, 1984-88.—Oct. 1992.
Auto industry jobs in the 1980s: a decade of transition.—Feb. 1992.
Multifactor productivity in tires and inner tubes industry.—June 1989.
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