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Technical Note: Productivity (2007-2016)

Improve Productivity

DESCRIPTION:

This measures Labour productivity (as measured by GDP per hour worked) and provides an internationally recognised and comparable measure of competitiveness.

Progress against the target will be measured by ranking Scotland's level of labour productivity against the countries of the OECD (Organisation for Economic Co-operation and Development).

SOURCE:

Data for OECD countries is taken from the Productivity Statistics Portal section of the OECD web site (http://www.oecd.org/std/productivity-stats/). GDP per hour worked, for the most recent year, is estimated using GDP at current prices ($ US) and Purchasing Power Parities (PPP).

The OECD only provide a figure for the UK. In order to estimate labour productivity in Scotland, figures on Scotland's output per hour worked relative to the UK, which are produced by the Scottish Government as part of the Scottish National Accounts Programme, are required.

The role of purchasing power parity (PPP) in calculating international comparisons of labour productivity is to convert countries' national currencies into a common currency (here, US$) in order to account for differences in price levels between countries. This allows for comparisons in performance to be made across countries.

Labour productivity data are provided annually by the OECD. When this indicator was developed the OECD productivity database only provided productivity levels for the most recent year. Levels in earlier years are therefore estimated using the OECD’s productivity growth series for each member country. This OECD productivity database can be found at, http://stats.oecd.org/WBOS/index.aspx.

Previously, the only official statistics estimates of productivity for Scotland have been produced by ONS, based on Regional Accounts GVA and Regional Labour Market Statistics. However, as of 23 April 2014 official estimates of labour productivity from the Scottish National Accounts Programme have been available which report productivity on a consistent basis with the GDP figures used for other indicators. http://www.gov.scot/Topics/Statistics/Browse/Economy/SNAP/expstats/Productivity.

DEFINITIONS:

Labour productivity - defined as Gross Domestic Product (GDP) per hour worked - measures the amount of goods and services (output) produced from an hour of work. The most productive economies can produce higher levels of output from an hour of work.

Gross Domestic Product (GDP) is a measure of the value added to materials and other inputs in the production of goods and services by resident organisations; before allowing for depreciation or capital consumption. In accordance with UK National Accounting principles, GDP figures for Scotland exclude output from the North Sea oil and gas sector. Output from this sector - termed "extra-regio" activity - is not attributed to any one area of the UK. Net receipts from interest, profits and dividends abroad are also excluded.

There are two measures of GDP, market prices and basic prices. The estimates produced for Scotland are measured at basic prices, also known as Gross Value Added (GVA), which excludes taxes less subsidies on products (taxes on products include VAT and excise duties).

The Organisation for Economic Cooperation and Development (OECD) is an international organisation helping governments tackle the economic, social and governance challenges of a globalised economy. The OECD currently has 34 member countries, however data for three recently joined members (Chile, Estonia and Israel) have not been included in this indicator to allow like for like analysis since the purpose target was established.

BASELINE AND PAST TRENDS:

The baseline year for this target is 2006 (calendar year). The baseline value is 23.8%.

Gap between Scotland and lowest ranked country in the top quartile (per cent)

2000

26.0%

2001

26.8%

2002

26.6%

2003

25.6%

2004

22.6%

2005

23.8%

2006

23.8%

2007

25.1%

2008

23.8%

2009

21.0%

2010

21.6%

2011

22.8%

2012

23.7%

2013

24.3%

2014

23.5%

CRITERIA FOR RECENT CHANGE ARROW:

The evaluation is based on the gap between productivity levels in Scotland compared to the lowest ranked country in the top quartile. Any difference in the gap within +/- 1 percentage points of last year's figure suggests that the position is more likely to be maintaining than showing any change. A decrease in the gap of 1 percentage point or more suggests that the position is improving; whereas an increase in the gap of 1 percentage point or more suggests the position is worsening.

For information on general methodological approach, please click here.

FUTURE ISSUES OR REVIEWS:

Estimates of GDP are produced using a range of data sources including monthly and quarterly turnover; published data sources (e.g. on employment levels or activity levels in certain industries); and data received directly from companies and other organisations. These data sources are in a constant state of development. As a result data sources and methods used in the measurement of GDP and other economic statistics will at times need to be revised.

Until the update in 2014, this productivity indicator was based on estimates of productivity for Scotland produced by the ONS, based on Regional Accounts GVA and Regional Labour Market statistics. However, by relying on ONS Regional GVA the productivity estimates were not consistent with the GDP and GVA statistics produced by the Scottish Government and widely used as the main indicator of output trends in the Scottish economy. Consequently, and as part of the Scottish National Accounts Programme (SNAP), the Scottish Government have published new estimates of Scottish productivity for the period 1998-2013, which are consistent with the Scottish Government GVA and GDP figures. Therefore, the SNAP estimates are now used to inform this indicator.

Revisions are also regularly made to the OECD data series. These revisions are mainly due to methodological updates in the OECD’s latest Purchasing Power Parity (PPP) benchmarking exercise, the implementation of the European industrial classification system NACE Rev.2 by European countries into their national accounts, the change of reference year in some OECD member countries, and the implementation of significant changes driven by the adoption of the System of National Accounts 2008 and European System of Accounts 2010.

ASSOCIATED TARGET:

The Government Economic Strategy sets out an ambitious target for Scotland: To rank in the top quartile for productivity amongst our key trading partners in the OECD by 2017.

Further information can be found at: http://www.gov.scot/Topics/Economy/EconomicStrategy.