Chapter 11.
Industry Productivity Measures
Labor Productivity Measures The indexes of output per hour measure the changes in the
relationship between output and the hours expended in producing that output. To calculate
a labor productivity index, an index of industry output is divided by an index of hours:
where:
-
=
the index of output in the current year,
-
= the
index of labor input the current year,
-
t = the current year, and
-
o = the base year.
For an industry producing a single uniform product or service, the
output index is simply the ratio of the number of units produced in the current year
divided by the number of units produced in the base year. Similarly, the employee hour
index equals hours expended in the current year divided by hours expended in the base
year.
More typically, industries produce a number of different products or
perform a number of different services. For these industries, output is calculated with a
Tornqvist formula:
where:
- = the ratio of output in the current year (t) to previous year (t-1)
-
n = number of products,
-
= the natural logarithm of the radio of the quantity product i in the
current year to the quantity in the previous year, and
- wi,t = the average value share
weight for product i
The average value share weight for product j is computed as:
where:
and price of product i at time t
The Tornqvist formula yields the ratio of output in a given year to that
in the previous year. The ratios arrived at in this manner then must be chained
together to form a series. If t = 3 and the base year is denoted by o, then
The resulting chained output index, , is used in the productivity formula. The employee
hour index for an industry with multiple products is calculated in the same manner as in
the single-output case.
The measures of output per hour relate output to one inputlabor
time. They do not measure the specific contribution of labor, capital, or any other factor
of production. The measures reflect the joint effect of a number of interrelated
influences such as changes in technology, capital investment per worker, capacity
utilization, intermediate inputs per worker, layout and flow of material, skill and effort
of the work force, managerial skill, and labor-management relations.
Next: Methods and
Sources
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