Stats NZ has a new website.

For new releases go to

www.stats.govt.nz

As we transition to our new site, you'll still find some Stats NZ information here on this archive site.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+
Productivity Statistics: 1978–2014
Embargoed until 10:45am  –  30 June 2015
Data quality

Period-specific information
This section contains information that has changed since the last release.

General information
This section contains information that does not change between releases.

Period-specific information  

Notes about this release

Data for 2013 and 2014 are provisional estimates. Industry-level data is available up to 2013, inclusive. We present the 2014 data for the measured sector and former measured sector. See below for further information about what constitutes the measured and former measured sectors.

We have incorporated updated international standards and other improvements to national accounts data (key inputs into the productivity calculations) into this release.

See Preview of 2014 national accounts improvements for more about the updates.

Data sources

We derived the data used in this release from the sources below.

Productivity statistics data sources
Data Publication Release date
Output Gross Domestic Product: December 2014 quarter 19 Mar 15
Labour volume Linked Employer-Employee Data: March 2014 quarter 25 May 15
  Household Labour Force Survey: September 2014 quarter 5 Nov 14
  Quarterly Employment Survey: September 2014 quarter 5 Nov 14
  Linked Employer-Employee Data: March 2013 year (annual tables) 27 Nov 14
Capital National Accounts (Industry Benchmarks): Year ended March 2012 21 Nov 14
Income shares National Accounts (Industry Benchmarks): Year ended March 2012 21 Nov 14
User costs National Accounts (Industry Benchmarks): Year ended March 2012 21 Nov 14

General information

What productivity analysis does 

Productivity analysis aims to explain the drivers of output growth. Output growth can be attributed to either an increase in labour or capital input, more efficient use of inputs, or a combination of both.

Productivity measures can be either single factor (relating a measure of output to a single measure of input), or multifactor (relating a measure of output to total inputs). Labour and capital productivity are single- (or partial-) factor productivity measures; they show productivity growth in terms of that particular input. Multifactor productivity (MFP) takes into account substitution between labour and capital inputs, and is therefore not directly affected by a change in the mix of inputs.

The output measure chosen may be either gross output or value added. Gross output is the total value of products produced in the economy, while value added is the total value of products produced minus the value of intermediate inputs used during the production process. The official productivity series all use chain-volume value added as the output measure. Separate series are produced for labour productivity, capital productivity, and MFP.

Productivity measures cover a subset of the economy referred to as the 'measured sector'. See more detail in Industry coverage – the measured sector. We use the series for output, labour inputs, and capital inputs for deriving partial productivity estimates. The two primary inputs (labour and capital) are combined to form a composite input index, which then allows for the residual calculation of MFP. A change in MFP reflects the change in output that cannot be accounted for by changes in the measures of labour and capital inputs.

Productivity measurement

Our method of estimating productivity statistics is based on OECD guidelines, as outlined in Measuring Productivity–OECD Manual Measurement of Aggregate and Industry-level Productivity Growth (OECD, 2001). The approach adopted is "the index number approach in a production theoretic framework".

See OECD for a PDF of the manual.

Calculating productivity

The calculation of productivity statistics begins by assuming a production function of the form:

 

V = A(t) x f(L,K)

    where V = value-added in constant prices
L = real labour inputs
K = real capital inputs
f(L,K) = a production function of L and K that defines an expected level of output
A(t) = a parameter that captures disembodied technical shifts over time, ie outward shifts of the production function allowing output to increase with a given level of inputs (= MFP).

Given the existence of index values for labour volume and value-added, it is possible to calculate labour productivity for the measured sector as:

 

LP = V / L

   

Where LP = an index of labour productivity. This is an index of value-added in constant prices divided by an index of labour inputs.

Similarly, a capital productivity index KP is calculated as:

 

KP = V / K

   

Where KP = an index of capital productivity. This is an index of value-added in constant prices divided by an index of capital inputs.

Caution needed with interpreting productivity measures

Care is needed in interpreting the partial measures of productivity. For example, labour productivity only partly measures 'true' labour productivity (ie the personal capacities of workers or the intensity of their efforts). Labour productivity reflects the level of capital available per worker and how efficiently labour is combined with the other factors of production. Labour productivity may change due to a substitution of capital for labour (capital deepening) or due to a change in MFP, with no change occurring in the labour input itself.

Capital productivity measures have similar constraints. We assume capital services in production analysis to be proportional to the capital stock. If the relationship does not change over time, the growth rate of capital services is identical to the rate of growth of the capital stock. This is clearly an unrealistic assumption, given the variations in the rates of capacity utilisation of capital stocks. Consequently, swings in the rates of capacity utilisation are picked up by the residual productivity measure, ie MFP.

MFP  is the final productivity index that can be calculated. The technology parameter that represents disembodied technological change (or MFP) cannot be observed directly. By rearranging the production function equation, we can show that the technology parameter can be derived residually as the difference between the growth in an index of outputs and an index of  inputs:

 

A(t) = V / f(L,K)

Certain assumptions must be met for MFP to be a measure of disembodied technology change. We assume the production function exhibits constant returns to scale, and all inputs are assumed to be included in scope of the production function.

In practice, these conditions will not be met and our customers need to interpret the resulting MFP residual with caution. Given the importance of technological progress as an explanatory factor in economic growth, attention often focuses on the MFP measure as though it was a measure of technological change. However, this is not always the case. When interpreting MFP, the following should be noted.

  • Not all technological change translates into MFP growth. Embodied technological change, such as advances in the quality of capital or improved human capital, are captured in the measured contributions of the inputs, provided they are measured correctly (ie the volume input series includes quality change).
  • MFP growth is not necessarily caused by technological change. Other non-technological factors are picked up by the residual, including economies of scale, cyclical effects, inefficiencies, and measurement errors.

Calculating labour, capital, and MFP therefore relies on appropriate output indexes, and labour, capital, and total input indexes to be created. The steps we take to calculate those indexes are described below.

Output series methodology

Output is defined as constant-price value added. The annual value added for the measured sector is derived by following the same procedures used to derive constant-price GDP (as a chain-volume Laspeyres volume index of the constant-price value added of the industries making up the measured sector).

Labour series methodology

The labour volume series

The labour volume series (LVS) is an estimate of paid hours (ordinary time plus paid overtime) for all employed people engaged in producing goods and services in the measured sector in New Zealand. We compile the series using a number of data sources, from which the best characteristics of each are used for productivity measurement.

The primary data sources are the Quarterly Employment Survey (QES), Business Demography Data (BDD), and Linked Employer-Employee Data (LEED, from 2000 onwards). The first two sources are establishment-based, and are supplemented with census and Household Labour Force Survey (HLFS) data for working proprietors and for industries excluded from the QES. LEED is an administrative data source that uses data from our Business Register and administrative taxation sources.

Throughout the LVS, three components are summed to an industry level:

  • employees in industries covered by employment surveys 
  • employees in industries out of scope of employment surveys
  • working proprietors.

For each of these components, the LVS is constructed by estimating: 

  • job/worker counts
  • weekly paid hours per job/worker.

These are multiplied to give total weekly paid hours for the measured sector. We calculate an annual (March year) average of the weekly paid hours at the industry level. It is aggregated to the measured-sector level, as published in tables 1.03, 2.03, and 3.03 of this release.

Quality assurance of the industry labour volume series

As quality assurance for the industry productivity measures, the employee job/worker counts and weekly paid hours series that feed into the measured sector LVS, are subject to several coherency adjustments.

The main data sources we use in constructing the LVS are sourced independently of the estimates of compensation of employees (CoE) from the national accounts. CoE estimates are primarily derived from the Annual Enterprise Survey, while we compile LVS estimates using a number of different sources. Current-price CoE estimates are deflated using the QES average hourly earnings measure to provide an implicit LVS. This provides a benchmark for comparing against the LVS at an industry level.

For years in which the LVS showed a significantly different movement to the deflated CoE series, we compared both movements to alternative labour volume data sources. Adjustments were then made to the industry LVS where we deemed it appropriate.

Rating forward the LVS to calculate the latest values

LEED employee count data was available for all quarters including March 2014, due to the later release in 2015. Working-proprietor count data was unavailable for the last year of the series. Therefore, we used actual working-proprietor count data, rated forward. Working-proprietor counts were rated forward using HLFS movements. We made adjustments where necessary. We calculate average hours worked per industry as for previous years.

The labour input index

The industry volume series are aggregated to the measured-sector level by means of a chained Törnqvist index. The quantity relatives in the index are two-period ratios of industry labour volumes. Industry two-period mean shares of measured-sector nominal labour income form the exponential weights.

Composition-adjusted labour input

Composition-adjusted productivity measures account for the effect of changes in the skill composition of workers. These are theoretically better measures of productivity as they allow us to also explain output growth by changes in labour composition, thereby reducing the contribution of the residual (ie MFP) to growth.

Composition-adjusted labour is calculated by adjusting the LVS using movements in a labour composition index, which estimates changes in skill composition using proxies for skill (education attainment and work experience). We calculate this index by using the HLFS to estimate the proportions of each skill category of worker, while we use the New Zealand Income Survey (NZIS), an annual supplement to the HLFS, to compile income shares for each group. Due to the availability of NZIS data, the composition-adjusted series runs from 1998.

See Accounting for changes in labour composition in the measurement of labour productivity for further background on composition-adjustment, and details on the methodology.

Capital input series methodology

The capital services input index measures the flow of capital services generated by using the stock of capital assets for a given March year. The capital services measure starts with the chain-volume productive capital stock series from the national accounts, supplemented by estimates of eight other assets: inventories (which include estimates of livestock and timber before 1980), and seven different types of land (commercial, industrial, mining, agricultural, forestry, residential, and other).

We assume capital service flows to be proportional to the productive capital stock of each asset. These flows are aggregated to industry-level using a Törnqvist index, with weights based on asset-specific implicit rental prices (user costs). The industry-level flows are then aggregated to the measured-sector level using industry shares of the measured-sector current-price capital income as weights.

Productivity statistics do not account for changes in capacity utilisation of capital, as we assume capital assets to be used at a constant rate throughout the growth cycle and over their life. Growth in capital input may be understated when capacity utilisation is increasing and capital productivity may be overstated. 

Furthermore, capacity utilisation adjustment has minimal impact on long-term growth, leading to marginally lower capital input growth and higher MFP growth at the measured sector level. In the short term, the effects of adjusting productivity statistics for variable capacity utilisation are more significant, leading to less volatile MFP estimates.

See Adjusting productivity statistics for variable capacity utilisation: Working harder or hardly working? for detailed explanation on this subject.

Capital and labour income shares

We calculate the measured-sector capital and labour nominal-income shares as the ratio of capital and labour income, respectively, to total income. Capital and labour nominal-income totals are calculated at the industry level, and are derived from the income measure of GDP within the national accounts.

The income measure of GDP is calculated as CoE, plus gross operating surplus, plus taxes on production and imports, less subsidies (taxes less subsidies are known as net taxes). Included within gross operating surplus is the income of working proprietors, which is termed mixed income. Mixed income is split into labour and capital components by calculating the labour income of working proprietors directly, and deriving the capital income of working proprietors residually. In calculating the labour income of working proprietors, we assume that the average hourly wage rate of a working proprietor in a given industry is equivalent to that of an employee.

Net taxes on production and imports are split into labour and capital components according to existing industry income shares.

Labour income is calculated as the sum of compensation of employees, labour mixed income, net taxes on production and imports attributable to labour. Capital income is calculated as the sum of gross operating surplus, capital mixed income, net taxes on production, and imports attributable to capital.

Weights within productivity

Capital and labour income shares are used as weights within the productivity series. we use mean two-period industry income shares to weight the capital and labour input indexes from the industry level to the measured-sector level. Mean two-period measured-sector income shares are then used to weight capital and labour when deriving the total inputs index, which is used in calculating MFP. Capital and labour income shares are also used to weight the contribution of capital input and labour input, respectively, within the growth accounting framework.

We also use the capital income share to weight the contribution of capital deepening within the growth accounting for labour productivity equation.

Annual current price income data are only available up to 2012, the latest year for which we've completed the national accounts supply-use balancing process. Therefore, labour and capital income shares are held constant from 2012 to 2014.

Total input series methodology

We construct a composite total input index by combining the labour and capital input indexes at the measured-sector level. The total inputs index is a Törnqvist index, with the industry factor income shares providing the weights.

Calculating the productivity indexes

The construction of output, labour input, capital input, and composite total input indexes then allows us to calculate the labour productivity, capital productivity, and MFP measures, using the formula under 'Productivity measurement'.

Growth accounting decomposition

The growth accounting technique examines how much of an industry’s output growth can be explained by the growth rate in different inputs (labour and capital). we determine the additional output growth – known as MFP – residually. Under the composition-adjusted approach, changes in output can also come from a change in the skill composition of labour.

The growth accounting decomposition for output (ie value added, or real GDP) is presented as follows.

  V = (L ^ W L) x (K ^ W K) x MFP
 
   

 V = the change in value added (over one period)
 L = the change in labour input (over one period)
 K = the change in capital input (over one period)
 MFP = the change in MFP (over one period)
 W L = labour's share of total income
 W K = capital's share of total income.  

 

As can be seen, the changes in labour input and capital input are exponentially weighted by their respective shares of total income. This gives the contribution of labour input and capital input, respectively, to output growth.

Under the composition-adjusted approach, we decompose output growth into an additional variable – the skill composition of labour. This is presented in the equation below.

 

V = (L ^ W L) x (S ^ W L) x (K ^ W K) x MFP 

 

   S = the change in skill composition (over one period).

 

To obtain the contribution of skill composition towards output, it also needs to be exponentially weighted by labour's share of total income.

The growth-accounting technique also examines how much of an industry’s labour productivity growth can be determined by growth in the amount of capital available per worker. Again, we determine the additional labour productivity growth residually – it is MFP.

Expression base

The productivity indexes for the measured sector now have an expression base of the year ended March 1996=1000, while the former measured sector used March 1978=1000, consistent with the first year of the series. The composition-adjusted productivity indexes have an expression base of the year ended March 1998=1000, also the first year of the series.

Estimating growth cycles

This release contains productivity data presented as annual averages within growth cycles. While our productivity model assumes no differences (across industry and time) in the asset capacity utilisation rates, in reality capacity utilisation of capital varies across a cycle. The cycles are identified as 'peak to peak', determined where output growth and/or MFP growth are at their highest deviation from trend. The final growth cycles selected also take into account economic events throughout the time period.

Please note that the latest period (2008–14) is not a complete cycle. we advise caution when comparing the latest period with other cycles. This is because productivity growth within an incomplete cycle can be biased; it will not fully reflect the ups and downs in capacity utilisation as a complete cycle would.

Extracting growth cycles from productivity indexes has more detail on the methodology and associated economic commentary used for determining the growth cycles.

Industry coverage – the measured sector

Our productivity measures do not cover the entire economy. The statistics cover a subset of the economy known as the 'measured sector'.  It covers industries that mainly contain enterprises that are market producers. This means they sell their products for economically significant prices that affect the quantity that consumers are willing to purchase.

We include two major aggregates with this information release. These are the measured sector and the former measured sector. The measured sector productivity series is available from 1996 to 2014, and covers 77.3 percent of the economy. The former measured sector has narrower industry coverage but a longer time series (from 1978 to 2014 and covering 58.1 percent of the economy). The measured and former measured sectors are comparable directly with the Australian Bureau of Statistics market industries and selected industries series, respectively.

We exclude the following industries: ownership of owner-occupied dwellings (LL2), public administration and safety (OO1 and OO2), education and training (PP1), and health care and social assistance (QQ1). The table below shows industry coverage as a proportion of GDP under ANZSIC06.

Industry coverage under ANZSIC06
ANZSIC06 industry Proportion of GDP(1), percent
Primary sector

                        9.0        

     AAZ - Agriculture, forestry, and fishing 

                        6.9 

     BB1 - Mining                         2.1
Goods-producing sector                       21.3
     CCZ - Manufacturing                       12.1
     DD1 - Electricity, gas, water, and waste services                          3.4
     EE1 - Construction                         5.8
Service sector(2)                        47.0
     FF1 - Wholesale trade                          5.5
     GH1 - Retail trade                         4.4
     GH2 - Accommodation and food services                          2.2
     II1 - Transport, postal, and warehousing                         5.0
     JJ1 - Information media and telecommunications                         3.2
     KK1- Financial and insurance services                          5.9
     LL1 - Rental, hiring, and real estate services(3)                         7.1
     MN1 - Professional, scientific, and technical services(3)                         7.7
     MN2 - Administrative and support services(3)                         2.2
     RS1 - Arts and recreation services                         1.6
     RS2 - Other services(3)                         2.1
Total former measured sector(4)                        58.1 
Total measured sector(5)                       77.3
     OO1 - Local government administration                         0.6
     OO2 - Central government administration, defence, and public safety                         4.2
     PP1 - Education and training                         5.2
     QQ1 - Healthcare and social assistance                         6.4
     Ownership of owner-occupied dwellings                         6.4
Total non-measured sector                       22.7
Total all industries                      100.0

1. Proportion of current price GDP in 2012. 
2. Service sector differs from national accounts service sector, due to industries that are excluded.
3. Not included in the former measured sector. Industry series available from 1996. 
4. Former measured sector includes ANZSIC06 industries AA1-KK1 and RS1. Series available from 1978.
5. Measured sector includes ANZSIC06 industries AA1-MN2 (except LL2), RS1, and RS2. Series available from 1996.

Source: Statistics New Zealand

Comparing New Zealand’s productivity statistics with Australia

Official New Zealand productivity data can be compared against official Australian numbers. Both countries use the same industrial classification, Australian and New Zealand Standard Industrial Classification 2006 (ANZSIC06), so the measured sectors are comparable.

However, there are differences between New Zealand and Australia’s productivity data series:

  • Australian Bureau of Statistics (ABS) data is based on a June year; Statistics NZ data is based on a March year.
  • ABS productivity series excludes private landlords, but these are included in our series.
  • Growth cycles cannot be compared, due to each country having slightly different peaks in their cycles.

ABS market sector and selected industries estimates can be compared with our measured sector and former measured sector productivity estimates.

ABS selected industries dates back to 1974 and can be compared with our former measured sector, which dates back to 1978. Similarly, ABS market industries aggregate can be used to compare against our measured sector, with data available for comparison dating back to 1996.

In 2012, both the Australian selected industries series and New Zealand’s former measured sector covered around 60 percent of their respective economies. The ABS market industries series and our measured sector covered approximately 80 percent of their economies.  

The ABS series are available on their website, www.abs.gov.au.

See Taking on the West Island: How does New Zealand’s labour productivity stack up? and 

Taking on the West Island: Steps towards levelling the playing field for has more details on the comparisons between Australia and New Zealand’s labour productivity.

More information

Statistics in this release have been produced in accordance with the Official Statistics System principles and protocols for producers of Tier 1 statistics for quality. They conform to the Statistics NZ Methodological Standard for Reporting of Data Quality.

Liability

While all care and diligence has been used in processing, analysing, and extracting data and information in this publication, Statistics NZ gives no warranty it is error-free and will not be liable for any loss or damage suffered by the use directly, or indirectly, of the information in this publication.

Timing

Our information releases are delivered electronically by third parties. Delivery may be delayed by circumstances out of our control. Statistics NZ does not accept responsibility for any such delay.

Crown copyright©

Creative Commons logo.
This work is licensed under the Creative Commons Attribution 3.0 New Zealand licence. You are free to copy, distribute, and adapt the work, as long as you attribute the work to Statistics NZ and abide by the other licence terms. Please note you may not use any departmental or governmental emblem, logo, or coat of arms in any way that infringes any provision of the Flags, Emblems, and Names Protection Act 1981. Use the wording 'Statistics New Zealand' in your attribution, not the Statistics NZ logo.

  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+

Does the information on this page meet your needs?


Top
  • Share this page to Facebook
  • Share this page to Twitter
  • Share this page to Google+