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Since 1983-84, the volume of Market sector labour input has grown by 1.3% per year on an hours worked basis, and by 1.7% per year on a quality adjusted hours worked basis (experimental series). This reflects a 0.4% per year improvement in the quality of labour over the period, measured in terms of educational attainment and work experience. The faster growth in the quality adjusted input measure is reflected in the lower growth in quality adjusted productivity measures, relative to unadjusted estimates. That is, some of the growth in the unadjusted measure can be attributed to quality changes which are explicitly measured in the quality adjusted measures.
In 2007-08, labour productivity for the market sector increased by 1.1%, reflecting a 2.7% increase in the hours worked measure of labour input, against a 3.8% increase in market sector GDP. Quality adjusted labour productivity increased by 0.8%, indicating an improvement in the composition of labour in the labour force. The figures below show labour inputs and labour productivity on an hours worked basis and a quality adjusted hours worked basis.
Productivity growth cycles
A common method of examining changes in productivity over an extended period involves identifying and dividing the data into productivity 'growth cycles'. Year to year changes in measured productivity may reflect changes that are conceptually distinct from the notion of productivity. In particular, changes in the degree to which businesses are utilising their capital stock would ideally be recorded as changes in the capital services inputs. As there is insufficient information to implement such an adjustment, it is assumed for the purpose of measurement that this capital is utilised at a constant rate. This means that year to year changes in estimates may not be truly indicative of a change in productivity. By analysing average productivity statistics between growth cycle peaks, the effects of some of these influences can be minimised, allowing better analysis of the drivers of growth in different periods.
Productivity growth cycle peaks are determined by comparing the annual MFP estimates with their corresponding long-term trend estimates (footnote 3). The peak deviations between these two series are the primary indicators of a growth-cycle peak, although the more general economic conditions at the time are also considered. The most recent cycle was for the period 1998-99 to 2003-04.
The figure below provides an indication of the longer term changes in productivity growth over the last 40 years. It is worth highlighting the cycle from 1993-94 to 1998-99, as it represents the largest average increase in MFP in the series. This was the result of strong growth in market sector output outweighing the growth in observed inputs (labour and capital). In contrast to this cycle is the 1984-85 to 1988-89 cycle, where similar growth in market sector output was recorded, but was offset by relatively larger increases in inputs, particularly labour, and hence lower MFP growth. See Table 23 for more details.
3 The long term trend estimates are calculated using an 11-term Henderson moving average of the original, annual indexes. <back
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