Productivity Measures for Retail Trade: Data and Issues: Alternative Concepts for the Output of Retail Trade Industries Have Been Proposed and Implemented, but the Conclusion of Strong Labor Productivity Growth in This Sector Is Robust to the Choice of Measure

By Manser, Marilyn E. | Monthly Labor Review, July 2005 | Go to article overview

Productivity Measures for Retail Trade: Data and Issues: Alternative Concepts for the Output of Retail Trade Industries Have Been Proposed and Implemented, but the Conclusion of Strong Labor Productivity Growth in This Sector Is Robust to the Choice of Measure


Manser, Marilyn E., Monthly Labor Review


The retail trade industry is a major component of the U.S. economy, with employment exceeding that in manufacturing. Yet only recently has the strong productivity performance of the retail sector been widely noted. Analysis of productivity growth in retail trade is especially challenging because it involves defining what output is for the industry, and different concepts can be used.

This article discusses conceptual and other issues in measuring productivity for retail trade industries, and presents current information on productivity in these industries in the United States. First it discusses the classification of retail trade activities. Second, it focuses on issues in defining the output concept for retail trade and in obtaining operational measures. Third, it presents data and comparisons for various measures and fourth, it addresses issues in comparing changes in retail trade productivity across countries.

Classification of retail trade

Recently, U.S. data have been converted to the new North American Industry Classification System (NAICS). NAICS retail trade (industries 44-45) includes stores and nonstore retailers and excludes food services and drinking places (NAICS 722). Both NAICS and the earlier Standard Industrial Classification (sic) system classify retail stores according to the types of goods that are being moved to the consumer. Eating and drinking places were classified as part of the retail trade division under the SiC (industries 52-59).

Two other major differences between NAICS and SIC also affect the classification of retail trade. Under NAICS, unlike SiC, auxiliary units involved in management or support activities such as transportation, warehousing, accounting and related services, and repair and maintenance are classified into specialized industries rather than including them in the industries they support, including retail trade. In addition, NAICS considers the method of selling when classifying establishments into wholesale versus retail trade, whereas the SIC system focused on the class of customer. This latter change caused a noticeable increase in the size of the retail trade sector, with a corresponding decrease in wholesale trade.

All of the changes previously described were introduced with the initial 1997 version of NAICS and continue under the 2002 NAICS revision. There were no changes at the three-digit level for retail trade between 1997 and 2002, but additional detail is provided for two retail trade industries under NAICS 2002. This article uses the NAICS 2002 definition of retail trade, unless otherwise noted.

Output concepts and issues

Industry output and productivity concepts. The broadest measure of productivity is multifactor productivity, which relates output to an index of all the inputs used in its production. Multifactor productivity (MFP) change measures the joint influences on economic growth of technological change, efficiency improvements, returns to scale, and other factors. The most commonly used measure of productivity is labor productivity, which is defined simply as output per hour. Labor productivity measures are produced and used more widely than multifactor measures because data needed for inputs other than labor are not available on a quarterly basis, are not as timely, and are not available or not measured precisely for many industries. Besides measuring the joint influences of the factors noted, labor productivity change also reflects the substitution of other inputs for labor in the production process.

To measure either labor or multifactor productivity for industries, we must define output. The Bureau of Labor Statistics (BLS) prefers the sectoral output concept for measuring industry output and productivity growth in the United States. Sectoral output is defined as gross output of the industry less intraindustry transfers. (1) This choice arises from the recommendation of the U. …

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Productivity Measures for Retail Trade: Data and Issues: Alternative Concepts for the Output of Retail Trade Industries Have Been Proposed and Implemented, but the Conclusion of Strong Labor Productivity Growth in This Sector Is Robust to the Choice of Measure
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