Title: The importance of output choice: implications for productivity measurement
Abstract: Increases in productivity have long been associated with increases in compensation for employees.For several decades beginning in the 1940s, productivity had risen in tandem with employees' compensation.However, since the 1970s, productivity and compensation have steadily diverged. 1This trend, which will be referred to as the "productivity-compensation gap," has received much scrutiny from both academics and policymakers alike.Although research on the productivity-compensation gap has existed for some time, most work in this field has been conducted at the total nonfarm business sector or similar aggregate level. 2 However, the Bureau of Labor Statistics (BLS) publishes a wealth of detailed industry-level labor productivity and compensation data.Industry data can be used to look at this topic from a fresh perspective in order to see what is driving trends in the broader June 2017 | Vol.6 / No. 6 economy.This Beyond the Numbers article studies underlying trends over the 1987-2015 period in 183industries that are driving some of the widening gap between labor productivity and compensation observed in the nonfarm business sector. 3Most of the industries studied had increases in both labor productivity and compensation over the period studied; however, compensation lagged behind productivity in most cases.Labor productivity, defined as real output per hour worked, is a measure of how efficiently labor is used in producing goods and services.There are many possible factors affecting labor productivity growth, including changes in technology, capital investment, capacity utilization, use of intermediate inputs, improved managerial skills or organization of production, and improved skills of the workforce.In this article, all references to labor productivity are labeled as productivity for ease of reference.In addition, labor compensation, a measure of the cost to the employer for securing the services of labor, is defined as an employee's base wage and salary plus benefits.All references to labor compensation are on a per-hour basis and are adjusted for price change but are labeled as compensation for ease of reference. 4 Measures of hours worked and compensation cover all workers including production, supervisory, self-employed, and unpaid family workers.