Hours at work: a new base for BLS productivity statistics - Bureau of Labor Statistics

Monthly Labor Review, Feb, 1990 by Mary Jablonski, Kent Kunze, Phyllis Flohr Otto

Using data from a recently established survey, BLS defines a new measure of labor input; hours at work replace hours paid in statistics on productivity

In August 1989, the Bureau of Labor Statistics began publishing productivity statistics for major sectors of the U.S. economy that are based on a new measure of labor input: hours at work. Previous productivity statistics were based primarily on hours paid, which come from employer payroll records. The switch to hours at work was accomplished with data from one of the newer BLS surveys, the Hours at Work Survey.(1)

This article reports on the conversion to hours at work and the resulting effects on productivity statistics. It describes the Hours at Work Survey, which yields ratios of hours at work to hours paid, and presents results from the survey. The historical series of ratios constructed for the period prior to the Hours at Work Survey are discussed. The article concludes with a brief description of how the ratios of hours at work to hours paid are used to produce the new hours measures.

Conversion to hours at work

On August 3, 1989, the Bureau of Labor Statistics began using hours at work in its productivity and cost measures for the major sectors: business, nonfarm business, manufacturing, and nonfinancial corporations. All of the measures for these sectors that involve hours were altered, including output per hour and compensation per hour. The measures are published eight times a year in a Department of Labor news release, "Productivity and Costs," and also appear in Bureau of Labor Statistics publications, such as the Monthly Labor Review and Employment and Earnings. (2)

In the previous measures, hours of all persons consisted of hours paid of employees in the private nonfarm business sector and hours worked of self-employed persons, unpaid family workers, employees of government enterprises, and, in the business-sector measures, farm employees. Hours paid are based on information from the Current Employment Statistics program (also known as the establishment survey), which collects data from firms' payroll records each month. Hours paid of employees accounted for about 85 percent of total hours in the old business-sector hours measure. Hours worked of self-employed persons, unpaid family workers, employees of government enterprises, and farm employees are from the Current Population Survey, a monthly household survey.(3)

In the new measures, the hours paid of employees in private nonfarm business are replaced by a measure of their hours at work that was developed with the results of the Hours at Work Survey. Because the measure of hours at work excludes paid leave, which is composed of hours that are not devoted to the production process, it is preferred to hours paid as a measure of labor input for productivity statistics.(4)

The use of hours at work instead of hours paid has little effect on the long-term average annual growth rates of labor productivity, as measured by output per hour of all persons (table 1). For the period 1948 to 1988, the average annual growth rate of output per hour in nonfarm business is effectively unchanged when hours at work are substituted for hours paid. In manufacturing, the rate is one-tenth of a percentage point higher when the hours measure is hours at work.

Switching to hours at work increases the labor productivity growth rate slightly in non-farm business from 1948 to 1973 and from 1973 to 1979. The rate is one-tenth of a percentage point higher in both periods, and so the falloff in productivity growth during the two periods (the productivity slowdown) remains the same: 1.9 percentage points. Therefore, the switch to hours at work explains none of the productivity slowdown in nonfarm business in the 1970's. In the most recent period, 1979 to 1988, the annual growth rate of output per hour is one-tenth of a percentage point lower when hours at work of employees are the measure of labor input.

In manufacturing, the new measure of output per hour grew at an average annual rate that was one-tenth of a percentage point greater than that of the old measure from 1948 to 1973 and two-tenths of a percentage point greater from 1973 to 1979. Hence, a small fraction of the productivity slowdown in manufacturing in the 1970's (0.1 of 1.4 percentage points) can be explained by excluding paid leave from labor input. As in nonfarm business, the productivity growth rate in manufacturing is one-tenth of a percentage point lower from 1979 to 1988 when hours at work are used.

Annual differences in labor productivity growth rates based on the new and old hours series can be much larger than the long-term differences in the growth rates (table 2). For example, from 1982 to 1983, the percent change in output per hour using hours at work was lower than the percent change in output per hour using hours paid by three-tenths of a percentage point in nonfarm business and six-tenths of a percentage point in manufacturing. Similarly, substituting hours at work for hours paid increases the percent change in output per hour from 1985 to 1986 by half a percentage point in both nonfarm business and manufacturing.