Productivity Statistics User Group Proposed changes to Labour Productivity Statistics

1. Productivity Statistics User GroupProposed changes to Labour Productivity Statistics Mark Franklin John Allen 28 January 2014

2. Introduction • Estimates of Labour input are now available in terms of hours, workers and jobs for up to 64 industries • ONS believes that the new estimates have advantages over existing estimates of labour inputs for the purposes of measuring labour productivity • Subject to user feedback intends to implement a work programme to replace the existing series with series compiled using the new methodology

3. Motivation • The existing productivity system compiles labour inputs in the form of jobs and hours, referred to as productivity jobs and productivity hours, for the whole economy and a range of industries. • Estimates of output per job (OPJ) and output per hour (OPH) are published quarterly in the Labour Productivity release. • PJ and PH are hybrid estimates using business survey data combined with Labour Force Survey (LFS) data on overall employment, hours of work and the industry distribution of self employment.

4. Motivation • There are advantages in switching the emphasis from jobs (and OPJ) to workers (and OPW): • ONS currently publishes two separate series of jobs by industry – PJ as described earlier and Workforce Jobs (WFJ). There is evidence that some users construct their own productivity estimates using WFJ estimates for labour input, and evidence of also of confusion among users when – as can happen – PJ and WFJ provide conflicting information.

5. Methodological improvements • Full articulation of the split between employees and the self-employed • Consistency of industry coverage between sources and outputs • An experimental means of ‘nowcasting’ estimates for the latest quarter, one month earlier than estimates are available in the existing system. • Improvements to seasonal adjustment, properly reflecting the seasonality of the source data

6. Methodological improvements • The existing productivity system has been developed piecemeal over the last decade or so. • The new system is more streamlined and will reduce complexity, save time and reduce the potential for error. • The new system meets requirements under the European System of Accounts (ESA) in terms of the granularity and timeliness of the data delivery, which the existing system does not. • Now that UK estimates are provided to Eurostat are in line with the ESA requirements, comparability with other member states labour input data is possible, as well as the generation of EU aggregates.

7. Key features and innovations • Allocation of workers across industries: Allocates labour input across industries on a headcount (or worker) basis, in addition to the allocation on a jobs basis as in the present system. This headcount allocation uses LFS data on hours worked in first jobs and second jobs which are already collected within the current productivity hours system.

8. Key features and innovations • Split between employees and self-employed: In the present system, estimates of employees and the self-employed by industry are aggregated together and jointly benchmarked to LFS control totals for jobs and hours. Employee and self employed split cannot be easily recovered from the constrained and seasonally adjusted jobs and hours estimates. The new system has a fully articulated split between employees and the self employed, in terms of workers, jobs and hours worked for up to 64 industry components.

9. Contact details productivity@ons.gsi.gov.uk mark.franklin@ons.gsi.gov.uk 01633 455 981