Assessment Report: UK Productivity statistics

Published:
17 May 2021
Last updated:
17 May 2021

Executive Summary

Judgement on National Statistics Status

This assessment report was produced during the COVID-19 pandemic which has seen dramatic shocks to hours worked and economic output in the UK, both of which are key components of productivity statistics. Assessing the scale and impacts of the shocks on the statistics when the usual sources of data may be impaired presents major challenges to statistics producers. ONS has continued to produce and develop these statistics despite significant resource pressures and restricted data access.

In this assessment, we make our judgements about these statistics using the experiences of users and our own research from both before and during the pandemic. Where relevant, we highlight the impact of COVID-19 on these statistics.

We identified actions for ONS to further enhance the public value and quality of its UK productivity statistics. Where ONS’s quarterly labour productivity statistics already carry National Statistics status, fulfilling the requirements of this assessment will ensure that the designation of the statistics as National Statistics can continue. In respect to statistics here that are currently official statistics, we will consider whether their designation as National Statistics is desirable following this assessment.

The scope for this assessment is ONS’s suite of UK Labour and Multi-factor Productivity statistics (published in Productivity Economic Commentary, quarterly flash estimates, accompanying data tables and microdata available through ONS’s Secure Research Service), and the International Comparisons of Labour Productivity (ICP) ONS’s estimates of Public Service Productivity (PSP) are not in the scope of this assessment. The Office for Statistics Regulation intends to review the PSP statistics as part of its regulatory work programme for 2021-22.

 

Key Findings

Quality

Labour inputs for productivity statistics are primarily measured as hours worked, but also as numbers of workers or numbers of jobs. All these inputs draw on data from the Labour Force Survey (LFS) to some degree. Prior to the COVID-19 pandemic, there were known issues about LFS response rates, which had been steadily declining. The pandemic has had a significant impact on the way that LFS data are collected, although ONS has instigated mitigating measures Separate to this assessment, OSR looked into issues raised from the Economic Statistics Centre of Excellence on 14 January 2021 about ONS labour market estimates. ONS acknowledges that it is a complicated landscape at the moment. It intends to continue to publish data from the best sources and be open about their relative strengths and limitations so users can make informed judgements on the labour market.

ONS has acknowledged the challenges of measuring the economy during the pandemic. In addition to the problems with measuring labour inputs there have also been difficulties in measuring the economic output of the economy. These difficulties vary according to the restrictions introduced to manage the health effects of the pandemic. ONS has warned that there may be revisions to its statistics as it manages within the restrictions. The quality of the productivity statistics may be impacted by these effects.

ONS conducts checks of data and is aware of the operational circumstances in which its data for the productivity statistics are produced and uses other data sources where possible to corroborate its findings. ONS is aware of any coverage issues and potential sources of bias in the data collection and supply process. Information about the strengths and limitations of the data in the productivity economic commentary tends to be general mainly in the interests of producing shorter bulletins, for example noting that the statistics may be subject toincreased uncertainty’ and ‘increased likelihood of larger revisions’. This does not provide any judgement on the scale of the increased uncertainty or advice to users about how it might change the reliance they place on the data. ONS should go further by being open about perceived changes to the quality of the statistics as part of the narrative of interest to users.

ONS multi-factor productivity (MFP) statistics are theoretically superior measures to labour productivity, as they take account of the effects of multiple known inputs – in ONS’s case, quality-adjusted labour input and capital services. A decline in multi-factor productivity growth has been found to be an important feature of the productivity puzzle. However, we found a reluctance among some users in the policy community to use MFP measures as they are difficult to explain to users of policy advice. ONS has helped to explain MFP in language that is accessible by publishing a simple guide to MFP. ONS should go further and establish what the barriers are to the adoption of MFP by the policy community and include in its development plans ways of encouraging the use of MFP amongst such users and ways of extending its outreach to that community.

In 2018, ONS suspended publication of its International Comparisons of Productivity (ICP) because its estimates of UK labour productivity were not internationally comparable. There are known biases in measuring labour inputs in the UK. ONS proposed in February 2021 a short-term solution to restart publication of ICP estimates and the last publication of these statistics was in April 2018. Following the UK’s exit from the European Union, users are acutely aware of the need to compare the UK’s performance internationally. ONS should accelerate its plans to collaborate with its international partners, working closely with the OECD and introduce a system that is flexible enough to allow each country to make full use of its own sources, whilst still enabling the production of high-quality estimates that are suitable for international comparisons. Users told us that they very much welcome ONS’s intention to start publishing estimates of ICP again.

There is a risk to the quality of the statistics due to the reliance on informal collaborative relationships with data suppliers inside ONS. As there is a regular inflow of new staff coming into the productivity statistics team and then moving on due to staff rotation policy there is a risk of a loss of continuity and corporate memory. While we think the risk has been well-managed and there is regular engagement between data compilers and the productivity statistics team as users, ONS should check the appropriate levels of assurance for these statistics and that its arrangements for quality assuring these statistics are sufficiently robust.

Public Value

Overall, we found that ONS’s statistics and data on productivity to be useful, easy to navigate and relevant. They support understanding of the UK economy and the economic welfare of its citizens. ONS produces a prodigious range of productivity outputs at both macro and micro-economic levels, using techniques such as growth accounting and behavioural economics. It also publishes interesting research articles on productivity.

One of the reasons for our assessment of these statistics is to look at the extent to which the statistics help answer important questions about the productivity puzzle or puzzles. We found that there is much debate about the nature of the productivity puzzle(s). We received some feedback that ONS appears to adhere to the view that productivity is a supply-side concept and demand-side factors are indirect and second order. We also spoke to users who see the puzzle as relating to a much longer-term malaise, whereas ONS focuses on the slowdown in productivity following the financial crisis. A recent survey of UK academic economists tackled the question of which rationales behind the productivity slowdown are the most powerful, without drawing absolute agreement across the profession. The two most important causes for the productivity slowdown amongst the economists surveyed were low-demand (including due to the 2008 Global Financial Crisis, austerity, and Brexit) and labour market factors. Investment in human capital (including education and job retraining) was considered the policy most likely to improve private sector productivity. ONS does not accept that there has been bias towards supply-side explanations in its expression of the growth puzzle. The productivity analysts stand by their view of the productivity puzzle because of weak growth since the 2008 Global Financial Crisis, which is particularly acute in the UK. Overall, while there are different theories around the drivers of poor productivity growth in the UK, we found that ONS has been open about the debate and has published widely on the different rationales for the slowdown in productivity. ONS is only one body contributing to the effort to understand the drivers of the UK’s productivity puzzles. The debate about the productivity puzzles is now moving on due to Brexit and the COVID-19 pandemic and we expect ONS will continue to discuss in articles and commentary the latest research about how the puzzles present in the UK.

The statistics could be even more useful if ONS’s user engagement was more effective, particularly in clearly linking development priorities to the feedback it receives though engagement. We found that while ONS was good before the pandemic at sharing its work outwardly, there is room for improvement in the way it openly takes on board feedback from different sources. It is good to see that ONS has recently launched a user survey which closed in April 2021.

In 2018, ONS set out ambitious priorities for developing these statistics but has found making significant progress against these more challenging than anticipated, due to both the onset of the pandemic and staff changes.ONS needs to make demonstrable progress against the priorities which it has signalled to users. It also needs to be more transparent around its progress towards meeting priorities and objectives, by providing an updated development plan at the earliest opportunity. ONS has told us it will provide this update in the summer of 2021. ONS should find a better balance between statistical production and the development of the statistics to meet users’ current and future needs and priorities.

ONS’s recent move to a productivity economic commentary to replace several separate bulletins is a positive step towards telling a clearer and more holistic story of movements in productivity. Flash estimates of labour productivity produced using the latest labour market statistics and the gross value added (GVA) first quarterly estimates are published separately to the productivity bulletin. The combination of the flash estimates as well as the productivity economic commentary allows users to see more-timely estimates and later more-detailed estimates, providing balanced reporting.

We welcome the potential offered by ONS’s relatively new Management and Expectations Survey to examine the impact of COVID-19 on the main components of productivity – inputs, outputs and prices.

Trustworthiness

We have found the people, systems, and processes within ONS that support the production of these statistics and data demonstrate a high degree of trustworthiness. Analysts are well-managed and impartial and skilled in what they do.

 

Next Steps

The deadline for ONS to report back to us is September 2021, where we will review the progress that the team has made in addressing the requirements set out in this report. ONS should by the end of June 2021, publish an action plan alongside the statistics on its website which sets out its proposals for addressing the assessment requirements.

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