Description:

This indicator measures labour productivity (whole economy output per hour worked). This is an internationally recognised and comparable indicator of competitiveness. The Scottish Government has an ambition to reach the top quartile of OECD countries in terms of productivity.

Progress against the purpose target is indicated by measuring Scotland’s nominal (current price) level of productivity relative to OECD member states, at Purchasing Power Parity, and then calculating a ranked list based on the latest data.

Source of Data:

Data for Scotland is derived from the Scottish Government’s Labour Productivity and Quarterly National Accounts Scotland statistics releases. These allow estimates of nominal (current price) GDP per hour worked to be calculated at current prices in pounds sterling.

Data for OECD members is taken from the Productivity Statistics Portal section of the OECD web site (http://www.oecd.org/std/productivity-stats/). The data set used is annual GDP per hour worked at current prices and Purchasing Power Parities (US Dollars PPP).

The measure of GDP per hour worked differs slightly from the headline measure of GVA per hour worked reported in UK and Scottish Labour Productivity statistics, but is required for international comparisons. The Purchasing Power Parity exchange rate for the UK (including Scotland) is sourced from the OECD statistics portal and used to convert the Scottish results into current prices and Purchasing Power Parities (US Dollars PPP) comparable with the OECD data..

Definitions:

Labour productivity - defined as Gross Domestic Product (GDP) per hour worked - measures the average amount of goods and services produced for each hour worked by the labour force. Labour productivity can be measured for individual branches or companies, for industrial sectors or for the whole economy. The most productive economies can produce higher levels of output, on average, for each hour worked.

Gross domestic product (GDP) is a measure of economic activity which captures the value of goods and services produced within a country during a given period. GDP can be expressed in nominal or real terms. Nominal GDP reflects the value of all the goods and services produced during a given period, using their price at the time of production. Real GDP also reflects the value of produced goods and services, but it uses constant consumer and producer price indices to remove the effects of rising price levels (inflation).

Comparability across countries is achieved by using estimates of GDP and labour inputs from a common source (the OECD) and by converting local currency based measures of GDP using purchasing power parity (PPP) exchange rates. PPP exchange rates (usually referred to simply as PPPs) attempt to equalise the cost of a representative basket of goods and services in countries with different national currencies.

Nominal (current price) measures of productivity are suitable for cross-country comparisons of the level of productivity in a single year. Current price productivity estimates are indexed to USA=100 for each year, and show each country’s productivity relative to that of the USA in that year. In interpreting these estimates users should bear in mind that PPPs provide only an approximate conversion from national currencies and may not fully reflect national differences in the composition of a representative basket of goods and services. Additionally, care should be taken in interpreting movements in current price productivity estimates over time. For example, an increase in Scottish productivity relative to another country could be due to Scottish productivity growing faster, or falling less, or due to changes in relative prices or exchange rates between the two countries, or some combination of these movements. 

Estimates of total hours worked in Scotland during a given period are based on responses to the Annual Population Survey for actual hours worked, and derived as part of the ONS Regional Productivity estimates for NUTS1 areas of the UK.

Criteria for Change:

The evaluation is based on any change in Scotland’s rank among the OECD members. An increase in the rank indicates that performance is improving; whereas a decrease in the rank indicates that performance is worsening.

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