Productivity growth slows in the organic chemicals industry, (EXCERPT), Monthly Labor Review Online, June 1988

Productivity growth slows
in the organic chemicals industry

Clyde Huffstutler and Barbara Bingham

Output per employee hour in the manufacture of certain industrial organic chemicals—such as ethylene, acetic acid, and formaldehyde—rose at an average annual rate of 4.1 percent between 1963 and 1985, compared with 2.3 percent for all manufacturing.¹ (The industry accounts for nearly four-fifths of total employment in organic chemicals manufacturing.) Over the period, output increased at a faster rate, 5.0 percent a year, than employee hours, which rose by only 0.9 percent.

Productivity growth was greatest from 1963 to 1974, when it increased at a rate of 6.6 percent a year. From 1974 to 1979, the rate dropped to 3.2 percent, reflecting a slowdown in output growth and an increase in the employee hour rate. During the years 1979 to 1985, the productivity rate slowed further, to 1 percent, as both output and hours declined. (See table 1.)

Year-to-year movements in output per hour were volatile, ranging from a 21-percent increase in 1983 to a 17-percent decline in 1975. From 1963 through 1979, the magnitude of change in productivity was generally about the same as, or slightly less than, the corresponding change in output. After 1979, productivity and output still moved in the same direction, but the annual productivity changes were sometimes greater than output changes, largely attributable to a sustained decline in employee hours.

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Footnote

1 The segment of the organic chemicals industry discussed in this article, sic2869, is defined in the 1972 Standard Industrial Classification Manual as including establishments primarily engaged in manufacturing industrial organic chemicals not elsewhere classified. Important products of this industry include: noncyclic organic chemicals; solvents; polyhydric alcohols; synthetic perfume and flavoring materials; rubber processing chemicals; plasticizers; synthetic tanning agents; chemical warfare gas; and esters, amines, etc. of polyhydric alcohols and fatty and other acids.
Average annual rates of change presented in this article are based on linear least squares of the logarithms of the index numbers. Extensions of the indexes will appear in the annual BLS Bulletin, Productivity Measures for Selected Industries and Government Services.

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