Productivity

Glossary

Business sector

Productivity measures exclude all non-commercial activities as well as the rental value of owner-occupied dwellings from total activity to define the business sector. Corresponding exclusions are also made to compensation and hours worked. In 1997, business sector gross domestic product accounted for about 75% of the Canadian total. The business sector is further divided into the goods sector and the services sector.

Business sector goods industries

Consist of agriculture, fishing, forestry, mining activities, manufacturing, construction and public utilities.

Business sector services industries

Consist of transportation and storage, communications, wholesale and retail trade, finance, insurance and real estate, and the group formed by socio-cultural, business and personal services.

Capital cost

Capital cost is defined as the gross output less the labour and intermediate expenses. Thus, it represents the surplus—profits, depreciation and net interest—intended as compensation to the owners of capital.

Capital input

Capital input measures the services derived from the stock of physical assets and software used in production. The assets included are fixed business equipment, structures, inventories, and land.

Capital per hour

Capital per hour is the ratio of capital services to hours worked.

Capital productivity

Capital productivity is measured as real output per unit of capital services.

Capital services price

Capital services price is the capital cost per unit of capital services.

Choice of a productivity measure

In calculating productivity, a variety of measures of production (and thus inputs of production) can be used: value-added, gross output and sectoral output (or gross output less intra-industry sales). The choice of a measure of productivity will naturally depend on the user's analytical needs. For example, a measure based on sectoral output is useful because it allows for comparisons with the U.S. industry estimates.

Combined inputs

A weighted sum of inputs, particularly labour and capital. The weighting used to combine labour, capital and sometimes other factors (such as energy, raw materials and services) corresponds to the cost share for each input with respect to total revenue for the sector.

Contribution of capital intensity to labour productivity growth

This is calculated as the growth in capital services per hour times capital's share of nominal gross domestic product. It reflects the effects of capital investment on labour productivity growth.

Contribution of labour composition to labour productivity growth

This is calculated as the growth rate of labour composition times labour's share of nominal gross domestic product. It reflects the effects, on labour productivity growth, of skill upgrading as measured by increases in the experience and education composition of the workforce.

Fisher chain index

The geometric mean of the Laspeyres and Paasche chain indices. The Fisher chain index treats two periods symmetrically. The real gross domestic product indices that are used to determine variations in quantity for the measurement of productivity are based on Fisher chain indices.

Gross domestic product per hour worked

See Labour productivity.

Hourly compensation

See Total compensation per hour worked.

Hours worked

The number of hours worked in all jobs is the annual average for all jobs times the hours worked per job for all jobs. Hours worked is the total number of hours that a person spends working, whether paid or not. In general, this includes regular and overtime hours, breaks, travel time, training in the workplace and time lost in brief work stoppages where workers remain at their posts. Time lost to strikes, lockouts, annual vacation, public holidays, sick leave, maternity leave or leave for personal needs is not included.

Implicit price deflator

See Output price.

Input

An economic resource used in a firm's production process. A distinction is usually drawn between two primary inputs (labour and capital) and intermediate inputs (energy and raw materials).

KLEMS

Capital, labour, energy, materials and services.

Labour cost

See Total labour compensation.

Labour input

This measures the services derived from the labour. Labour services are obtained by aggregation of the hours worked by all persons, classified by education and work experience with weights determined by their shares of labour compensation.

Labour price

Labour price is the ratio of labour cost to labour services.

Labour productivity

The ratio of output to hours worked. Economic performance as measured by labour productivity must be interpreted carefully, as labour productivity estimates reflect changes in other factors of production (such as capital) in addition to growth in productivity efficiency.

Labour share

Labour share is equal to the labour compensation divided by current dollar output.

Multifactor productivity

A measure of productivity growth, taking into account all of the resources used in the production activity. Multifactor productivity growth is estimated residually as the difference between the growth rate of output and the growth rate of combined inputs.

Output

The final product of the production activity obtained from the combination of resources such as labour, capital, materials, services and energy.

Output price

Output price is equal to current-dollar output, divided by real output.

Primary inputs

Labour input combined with capital input, using labour's and capital's share of costs as weights to form a Fisher chain index.

Productivity index

The ratio of the output index to the combined inputs index; the output and the combined inputs are evaluated at constant prices. Expressing productivity levels using indices facilitates comparison and analysis with respect to a base year.

Real gross domestic product (GDP)

The total value of goods and services produced during a given period within the country, regardless of the nationality of the production inputs. To make comparisons of GDP from one year to another, the effect of price variations must be eliminated. Thus, the variation solely in quantities produced is estimated by real GDP, that is, GDP for the period calculated at the price of another period (usually an earlier year), called the base year, such as 1997. The business-sector real GDP is constructed by using a Fisher chain index after removing, from the total economy GDP, all non-business production as well as the implicit value of rental on owner-occupied dwellings.

Total compensation per hour worked

The ratio of the total compensation for all jobs to the number of hours worked.

Total labour compensation

All payments in cash or in kind made by domestic producers to workers for services rendered—in other words, total payroll. It includes the salaries and supplementary labour income of paid workers, plus an imputed labour income for self-employed workers.

Unit capital cost is the capital cost per unit of output

It is also equal to the ratio of capital use per hour worked to capital productivity. Unit capital cost increases when capital use per hour worked increases more rapidly than capital productivity.

Unit labour cost is the labour cost per unit of output

It is calculated as the ratio of labour compensation to real gross domestic product. It is also equal to the ratio of labour compensation per hour worked to labour productivity. Unit labour cost increases when labour compensation per hour worked increases more rapidly than labour productivity. It is widely used to measure inflationary pressures arising from wage growth.

Unit labour cost in U.S. dollars

Unit labour cost in U.S. dollars is the equivalent of the ratio of Canadian unit labour cost to the exchange rate. The latter corresponds to the U.S. dollar value expressed in Canadian dollars.

Unit non-labour payments

Unit non-labour payments measure the cost of non-labour items such as depreciation, rent, interest, and indirect business taxes, in addition to corporate profits and profit-type income of proprietorships and partnerships.

Value-added

An industry's value-added is equal to its gross output (mainly sales) less its intermediate consumption (energy, raw materials and services) coming from other industries. The double-deflation procedure is used to measure real value-added: real intermediate input estimates are subtracted from real gross output estimates.