Alternative Measures of Supervisory Employee Hours and Productivity Growth: An Evaluation of New Estimates of Nonproduction and Supervisory Employee Hours Finds That the Procedure Currently Used by BLS to Estimate Nonproduction and Supervisory Employee Hours for the Major Sector Productivity Statistics Does Not Misstate Past Productivity Trends, but Does Undercount the Number of Hours Worked
Eldridge, Lucy P., Manser, Marilyn E., Otto, Phyllis Flohr, Monthly Labor Review
In searching for explanations for the speedup productivity growth that began in the mid-1990s, economists have analyzed real factors, as well as possible measurement problems. Most often they scrutinize the measurement of prices and real output. However, some analysts have also suggested that the Bureau of Labor Statistics is undercounting the number of hours people are working, and thus overstating productivity growth.
To construct hours for productivity measures, BLS primarily uses establishment reports from the BLS Current Employment Statistics program (CES). The CES, however, only collects hours for production and nonsupervisory workers. Therefore, to generate measures of hours for all employees, BLS must estimate the hours for nonproduction and supervisory workers. The primary assumption underlying these estimates has been that production/ nonsupervisory and nonproduction/supervisory workers work similar hours.
This study evaluates the hours series that underlie the major sector labor productivity statistics and sheds light on the direction and magnitude of any bias created by the procedures currently used to estimate nonproduction and supervisory employee hours. (1) Using data from the BLS-sponsored Current Population Survey (CPS), we construct estimates of the number of nonproduction and supervisory workers and their hours worked under three alternative definitions. We find that the estimated levels of average weekly hours for these workers are quite different from the assumptions currently used to estimate these values in the productivity program, at least for the nonfarm business and nonmanufacturing sectors. We use various criteria to select one of the three alternative definitions as preferred. Using the preferred alternative, we estimate the ratio of supervisory to nonsupervisory employee average weekly hours from the CPS and multiply this ratio by the level of nonsupervisory employee hours from the CES to estimate the level of supervisory employee hours. Nonproduction employee hours are estimated following this same approach. We find that trends in these CPS-adjusted hours series are very similar to trends in the hours series that underlie the official BLS productivity measures. One reason for this finding is that nonproduction and supervisory employees account for only 19 percent of total hours in the nonfarm business sector. Thus, the lack of data for nonproduction and supervisory workers is not resulting in biased measures of productivity trends.
BLS produces productivity statistics for major sectors of the U.S. economy, many domestic industries, and foreign countries. This article focuses on the BLS quarterly labor productivity statistics for the U.S. nonfarm business sector. (2) Labor productivity measures the relationship between real output and the labor resources used in the production of that output. The difference between output growth and labor hours growth is understood to reflect many sources of growth, including increases in the quantities of nonlabor inputs (that is, capital services, fuels, other intermediate materials, and purchased services); changes in technology; economies of scale; improvements in management techniques; and improvements in the skills of the labor force.
To calculate labor productivity for the U.S. nonfarm business sector, BLS combines indexes of real output, from the National Income and Product Accounts (NIPA) produced by the Bureau of Economic Analysis (BEA) of the U.S. Department of Commerce, with information on labor inputs from BLS. Indexes of hours paid are constructed primarily with data from the BLS Current Employment Statistics program, and with supplementary data from the BLS Hours at Work Survey, the National compensation Survey, and the CPS.
The CES is a monthly payroll survey that collects data on employment for all employees from a sample of nonfarm business establishments. (3) The CES also collects data on the average weekly hours-paid for production workers in goods-producing industries and nonsupervisory workers in service-producing industries. …