Government Measures of Private-Sector Productivity:

Users Recommend Changes

FGMSD-80-45: Published: Jul 8, 1980. Publicly Released: Jul 8, 1980.

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The Bureau of Labor Statistics (BLS) publishes a wide range of measures of the private sector's productivity. These measures are used primarily for economic analysis and forecasting directed toward improving the economy. GAO studied the measures to determine, from a user's viewpoint, how they might be improved. Additionally, the National Academy of Sciences examined the Government's productivity measures. The Academy convened 14 economists and other experts to study possible technical and conceptual improvements to the measures, whereas GAO concentrated on the general needs of users.

GAO found that improvement in national productivity is needed to aid the fight against inflation, but improvement must start at the lowest level of the economy, the firm. One way the Federal Government could help improve national productivity would be to encourage firms to measure their own productivity and compare themselves to firms in similar industries. The current BLS industry measures are based on industry aggregates which are too general to be used by firms in improving productivity. Although a program to develop firm and interfirm productivity measures could require BLS to work directly with a large number of firms, BLS is not structured for such an undertaking. The Department of Commerce has initiated some firm-level productivity improvement programs in the past few years, which could be the foundation for a significant new national productivity improvement program. But, the cost-effectiveness of improvements to productivity measures is nearly impossible to determine. The net contributions of productivity measures to economic analysis is uncertain as the measures are generally used in conjunction with other economic information. Therefore, the cost-effectiveness of any single improvement to the measures is doubly difficult to determine. Also, GAO found that only labor measures are published because labor input is the only statistic considered accurate enough for productivity. Historically, labor productivity has been used in economic analyses and forecasts as a substitute for multi-factor productivity. However, the use of a substitute is not always exact enough.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Labor should direct BLS to: (1) use the improvement priorities expressed by users in the GAO study as one criterion for attaching priorities to the recommendations of the National Academy of Sciences' Panel to Review Productivity Statistics; (2) develop a plan for producing multifactor productivity measures for the major sectors of the economy, establish a feasible target date for publishing these measures, determine the associated resources required, and seek authority to carry out the plan; (3) publish additional public information on the interpretation and use of productivity measures; and (4) confer with the Department of Commerce to determine what technical expertise the Department of Commerce needs to develop a firm-level productivity improvement program, and at what costs. Also, the Secretary of Commerce should: (1) determine the costs and other resources needed to establish a firm-level productivity improvement program which would have measurement as an important component; and (2) if the program appears feasible, seek authority to implement it. Further, the Department of Commerce should confer with BLS to explore various approaches to such a program.

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