Assessing Aggregate Labour Productivity Trends in Canada and the United States: Total Economy versus Business Sector Perspectives

• Main Author: Jeremy Smith
• Format: Article
• Language: English
• Published: Centre for the Study of Living Standards 2004-04-01
• Series: International Productivity Monitor
• Subjects: labour productivity growth; measurement issues; business sector
• Online Access: http://www.csls.ca/ipm/8/smith-e.pdf
• ISSN: 1492-9759; 1492-9767

The purpose of this paper is to provide a thorough discussion of the definitional and data issues associated with the measurement of aggregate labour productivity growth in Canada and the United States. The paper examines all data sources for output, employment and hours estimates in the two countries, and attempts to identify the series that are the most appropriate for the calculation of aggregate labour productivity – both from the perspective of the methodological merits of each series and of cross-country comparability. It also assesses the sensitivity of Canada-U.S. aggregate labour productivity growth comparisons to the choice of monitoring trends at the total economy or business sector level, investigates the sources of the differences between trends and comparisons assessed at each level, and discusses the advantages and disadvantages of making comparisons at each level. The paper finds compelling reasons to believe that the monitoring of total economy productivity trends is desirable in addition to the more common practice of focusing on the business sector. Canada has lagged the United States in terms of aggregate labour productivity growth over 1981-2003 to a much smaller degree according to total economy trends than according to business sector trends. This is caused by very high measured labour productivity growth in the non-business sector in Canada relative to the United States, which calls into question the reliability of productivity growth comparisons made at the total economy level. This also raises questions about the comparability of GDP growth between the two countries.