Multifactor Productivity in Household Furniture

Article excerpt

Multifactor productivity in household furniture manufacturing accounted for approximately one-third of the average annual labor productivity gain in the 1958-91 period; capital and intermediate purchases rose relative to labor

Multifactor productivity, a measure relating output to the combined inputs of labor, capital, and intermediate purchases, grew at an average annual rate of 0.5 percent between 1958 and 1991 in the household furniture industry. (See chart 1.) Many factors influence movements in multifactor productivity such as technological change, changes in die skill and effort of die work force, and economies of scale.

For more than 10 years, the Bureau of Labor Statistics has published a labor productivity measure for the household furniture industry. In this article, we extend the analysis of the household furniture industry, Standard Industrial Classification (sic) 25 1, by presenting a multifactor productivity measure for the industry.

Labor productivity increased at an average annual rate of 1.8 percent over the 1958-91 period. Labor productivity, as measured by output per employee hour, is comprised of the effects of changes in capital per hour, intermediate purchases per hour (materials, fuels, electricity, and purchased business services), and multifactor productivity. The multifactor measure accounts for the influences of capital and intermediate purchases in the input measure and does not reflect the impact of these influences on the productivity residual. It also allows analysts to quantify the effects on labor productivity of changes in capital relative to labor and intermediate purchases relative to labor.

BLS first published multifactor productivity measures in 1983, covering the private business sector, die private nonfarm business sector, and the total manufacturing sector. Since then, BLS has developed and published data for 20 two-digit manufacturing industries and 7 three-digit industries.

Establishments in the industry

The household furniture industry is composed of establishments that produce wood household furniture, upholstered furniture on wood frames, metal home furnishings, mattresses, bed foundations, dual purpose sleep furniture, and plastic, fiberglass, rattan and wicker furniture. The industry also includes the production of recreational (lawn and beach) furniture, except stone and concrete, and cabinets, except wood kitchen cabinets and bathroom vanities. Wood household furniture accounted for more than 40 percent of the output of this industry in 1987, followed by upholstered furniture (28.4 percent), mattresses (13.0 percent) and metal furnishings (11.5 percent). Wood television and radio cabinets and plastic and wicker furniture combined made up less than 5 percent of the value of industry shipments (1.9 percent and 2.2 percent, respectively).

The influence of changes in capital per hour on labor productivity will be referred to in this article as the "capital effect" and is measured by multiplying the change in the capital-labor ratio by the share of capital costs in the total cost of output. The influence of changes in intermediate purchases per hour on labor productivity is described as the "intermediate purchases effect" and is measured by multiplying the intermediate purchases-labor ratio by the share of intermediate purchases costs in the total cost of output.

Output per hour showed considerable growth of 2.2 percent per year in the 1958-73 period, but slowed to an average annual increase of 1.0 percent in the 1973-79 period. (See table 1.) This slowdown of 1.2 percentage points reflects the slowdown that occurred in the business sector as a whole. The most substantial influences on the slowdown in labor productivity in the household furniture industry were the falloffs in multifactor productivity and the intermediate purchases effect. Multifactor productivity growth slowed 0.8 percentage point while the intermediate purchases effect declined 0. …