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6.2  Comparative growth rates in ALP and TFP

As noted in Section 3, UK market sectors as a whole enjoyed faster average annual rates of ALP growth between 1995-2004 than did New Zealand. One way to explore the drivers of ALP growth rates is to compare growth rates in output with those in labour input at sector level across countries. Another is to compare the respective contributions of growth rates in physical capital, labour quality and MFP.

Figure 5 - Relative multi-factor productivity (MFP) levels in market sectors, New Zealand/UK, 1995-97, 1998-2000, 2002-04 (Index numbers: UK=100, Three-year averages)
Figure 5 - Relative multi-factor productivity (MFP) levels in market sectors, New Zealand/UK, 1995-97, 1998-2000, 2002-04 (Index numbers: UK=100, Three-year averages).
Notes:  Estimates are shown as three-year averages on a calendar year basis. Full time series shown in Appendix Table A6.

In general the slow rate of growth in UK labour input between 1995-2004 (which we identified in Section 3) was due to reductions in employment numbers in several manufacturing sectors and an overall decline of 3.5% over the period in average annual hours worked per employee.[13] In service sectors positive ALP growth in the UK typically reflected output growing much faster than labour inputs. By contrast, in New Zealand in most sectors output growth was slower and labour input growth was faster than in the UK (Table 11). As a result, there are only five sectors where average annual growth in ALP in New Zealand was above that in the UK: electricity, gas and water (which recorded sharp reductions in total hours worked), communication services and metal products (where output grew much more rapidly than labour input) and finance and insurance and wood products (where there was a slight reduction in labour input over the period).

Turning to an assessment of the respective contributions of physical capital-intensity, labour quality and MFP to average annual growth rates in ALP, Table 12A shows that in the UK growth in MFP exceeded growth in capital-intensity in 13 of the 21 sectors. The main exceptions were mining, electricity, gas and water, construction, wholesale, accommodation and restaurants and business services.

In New Zealand MFP growth also exceeded growth in physical capital in 13 of the 21 sectors. Three sectors even showed a decline in physical capital-intensity over the period: petroleum and chemicals, metal products and transport and storage. The highest rates of MFP growth occurred in communication services, metal products and wholesale trade. Communication services also recorded strong growth in capital-deepening as did electricity, gas and water, wood products and finance and insurance.

Table 11 - Average annual rates of growth in output, total hours worked and average labour productivity (ALP), New Zealand and the UK, 1995-2004
    UK New Zealand
    Output Labour input ALP Output Labour input ALP
SIC Sector Average annual rates of growth (%)
AA, AB, AC Agriculture, forestry and fishing 0.1 -3.4 3.5 1.7 -0.6 2.3
BA Mining 2.4 -1.7 4.1 0.9 -2.2 3.1
CA Food, beverage and tobacco manufacturing 1.5 -0.7 2.2 2.2 1.5 0.8
CB Textile and apparel manufacturing -7.0 -10.4 3.4 -0.9 -3.5 2.6
CC Wood and paper product manufacturing 1.0 -2.8 3.7 2.8 -0.2 3.1
CD Printing, publishing and recorded media 2.0 -0.8 2.8 -0.3 -1.2 0.9
CE Petroleum, chemical, plastic and rubber product manufacturing 0.0 -1.6 1.5 -0.1 -0.3 0.2
CF Non-metallic mineral product manufacturing -0.4 -2.6 2.2 2.8 1.3 1.4
CG Metal product manufacturing -1.3 -3.5 2.2 3.8 1.2 2.6
CH Machinery and equipment manufacturing 1.5 -2.6 4.1 2.6 -0.2 2.8
CI Furniture and other manufacturing 2.2 -0.5 2.7 0.7 -0.6 1.3
DA Electricity, gas and water supply 2.5 -1.7 4.2 0.6 -6.1 6.6
EA Construction 2.4 1.0 1.4 5.6 4.7 0.8
FA Wholesale trade 2.9 -0.2 3.1 4.0 1.0 3.1
GA Retail trade 4.0 0.6 3.4 3.6 1.4 2.2
HA Accommodation, restaurants and bars 3.5 1.5 2.0 2.6 3.0 -0.4
IA Transport and storage 4.6 1.0 3.6 3.3 1.6 1.7
JA Communication services 5.7 1.1 4.6 9.4 0.2 9.2
KA Finance and insurance 4.4 0.6 3.8 4.5 -0.3 4.8
LC Business services 6.1 3.3 2.8 4.9 5.4 -0.5
PA Cultural and recreational services 3.9 2.8 1.1 5.1 5.4 -0.3
  Total market sectors 3.4 0.5 3.0 3.6 1.6 2.0

 

Table 12A - Decomposition of average annual growth rates in average labour productivity (ALP) in market sectors, UK, 1995-2004
    Physical capital-intensity Labour quality MFP
UK 1995-2004 Average annual rate of growth in ALP (%) Contributions to ALP growth (percentage points):
AA, AB, AC Agriculture, forestry and fishing 3.54 1.34 0.30 1.90
BA Mining 4.10 2.33 0.11 1.66
CA Food, beverage and tobacco manufacturing 2.20 0.51 0.42 1.27
CB Textile and apparel manufacturing 3.38 1.28 0.76 1.33
CC Wood and paper product manufacturing 3.74 0.97 0.60 2.17
CD Printing, publishing and recorded media 2.81 0.32 0.53 1.96
CE Petroleum, chemical, plastic and rubber product manufacturing 1.52 0.70 0.54 0.27
CF Non-metallic mineral product manufacturing 2.23 0.83 0.35 1.05
CG Metal product manufacturing 2.22 0.40 0.52 1.30
CH Machinery and equipment manufacturing 4.11 0.93 0.45 2.73
CI Furniture and other manufacturing 2.73 0.78 0.34 1.61
DA Electricity, gas and water supply 4.25 3.53 0.11 0.61
EA Construction 1.43 1.81 0.17 -0.55
FA Wholesale trade 3.13 1.74 0.29 1.10
GA Retail trade 3.37 1.53 0.28 1.56
HA Accommodation, restaurants and bars 2.04 1.01 0.37 0.66
IA Transport and storage 3.59 0.59 0.15 2.85
JA Communication services 4.58 1.20 0.42 2.96
KA Finance and insurance 3.84 1.51 0.39 1.93
LC Business services 2.77 3.93 0.20 -1.35
PA Cultural and recreational services 1.06 -0.28 0.35 0.99
  Total market sectors 2.96 1.09 0.35 1.52

Table 12B - Decomposition of average annual growth rates in average labour productivity (ALP) in market sectors, New Zealand, 1995-2004
    Physical capital-intensity Labour quality MFP
New Zealand 1995-2004 Average annual rate of growth in ALP (%) Contributions to ALP growth (percentage points):
AA, AB, AC Agriculture, forestry and fishing 2.29 1.69 -0.22 0.81
BA Mining 3.13 2.96 -0.09 0.26
CA Food, beverage and tobacco manufacturing 0.76 0.96 0.05 -0.25
CB Textile and apparel manufacturing 2.58 0.35 0.08 2.15
CC Wood and paper product manufacturing 3.07 1.89 -0.02 1.20
CD Printing, publishing and recorded media 0.94 0.38 0.05 0.52
CE Petroleum, chemical, plastic and rubber product manufacturing 0.18 -0.64 -0.05 0.87
CF Non-metallic mineral product manufacturing 1.45 0.03 0.06 1.36
CG Metal product manufacturing 2.59 -0.57 0.00 3.15
CH Machinery and equipment manufacturing 2.76 0.60 0.01 2.15
CI Furniture and other manufacturing 1.25 -0.01 0.03 1.23
DA Electricity, gas and water supply 6.63 7.36 -0.06 -0.67
EA Construction 0.84 0.14 -0.41 1.12
FA Wholesale trade 3.09 0.13 -0.20 3.16
GA Retail trade 2.20 0.58 -0.28 1.90
HA Accommodation, restaurants and bars -0.37 0.68 -0.40 -0.66
IA Transport and storage 1.71 -0.10 -0.22 2.03
JA Communication services 9.16 4.03 -0.04 5.16
KA Finance and insurance 4.80 1.90 0.00 2.90
LC Business services -0.52 0.51 -0.06 -0.97
PA Cultural and recreational services -0.25 0.61 -0.06 -0.80
  Total market sectors 1.96 0.59 -0.13 1.50

Notes

  • [13]The reduction in average annual hours worked per employee in the UK represents a continuation of a long-term downward trend (Green, 2001). It also represents the net outcome of a relatively high degree of polarisation between long-hours working and part-time employment in the UK compared to other European countries. In 1998 the UK implemented the European Commission’s Working Time Directive which seeks to limit working time but employees are permitted to ‘opt out’ from its regulations in collaboration with their employers. To date the net effects of this Directive on average working time are hard to determine.
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