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June, 2001, Vol. 124, No. 6

Multifactor productivity trends in manufacturing industries, 1987–96

Ziaul Z. Ahmed and Patricia S. Wilder

Labor productivity, the most widely used measure of productivity, can grow as a result of increases in the quantities of capital services and intermediate inputs used in production and as a result of other factors. In order to provide an alternative picture of productivity change focusing on these other factors—such as economies of scale, changes in organizational efficiency, improvements in labor and management skill, changes in capacity utilization, and changes in technology—the Bureau of Labor Statistics recently developed multifactor productivity series for detailed manufacturing industries. These data show that between 1987 and 1996, multifactor productivity, measured as output per unit of combined inputs, rose in a majority of the 108 industries presented here. For more than 85 percent of these industries, however, multifactor productivity did not grow as much as labor productivity (defined as output per hour). The faster growth of labor productivity reflects increases in the contributions of capital and intermediate purchases over the period.¹ 

More specifically, multifactor productivity relates an index of output to an index of combined inputs of labor, capital, and intermediate purchases (materials, fuels, electricity, and services). Multifactor productivity is calculated as a residual that measures the change in an industry’s output that is not due to measured changes in labor, capital, or intermediate purchases inputs.

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Footnotes
1 Published indexes for multifactor productivity and related series are available at http///lpc/. Series for unpublished industries are available upon request. E-mail requests for information may be sent to dipsweb@bls.gov. BLS is planning to extend the industry multifactor productivity series to 1999 in the latter part of 2001.

Related BLS programs

Industry Productivity
Multifactor Productivity

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