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The Comparative Level of GDP per Capita in Canada and the United States: A Decomposition into Labour Productivity and Work Intensity Differences

By Jean-Pierre MaynardCanadian Productivity AccountsMicro-economic Analysis DivisionStatistics Canada

OECD Seminar, Bern, October 2006

2

Context

Mandated in the fall of 2003 to attempt a comparison of productivity levels between Canada and the United States

Published two studies in January 2005:– Baldwin & al, A comparison of Canada-US Productivity

Levels : An exploration of measurement issues – Baldwin, Maynard et Wong (BMW), The output gap

between Canada and the United States: the role of productivity (1994-2002)

Canada and the United States are neighbours The two economies are highly integrated About 80% of Canadian external trade are with the

United States.

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Objective of this presentation

Presenting the results of a third study:– With emphasis on the comparability of labour

measures between the two countries– Updating the level comparison to 2005

The selection of labour sources matter : Sometimes the best practice to compare levels

between two countries consists in using a combination of labour data from different surveys

For level comparisons, we should care about the comparability of the concept, the coverage and the accuracy or quality of the labour estimates used.

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Three different measures : gap in favour of the United States (%) - 2000

LP Work Intensity

GDP / Pop

=

Y / H H/ PopH / E E / Pat Pat /

Pop

M1 – BMW Study

-20 -7 -13 -6 -10 3

M2 – LFS / CPS

-20 -11 -9 -8 -5 4

M3 – Official - Productivity

Accounts

-20 -14 -6 1 -10 3

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Focus is on the relative labour market performance

Source of these differences:– Average Hours worked– Employment– Population

Methodology used for BMW : Σ Σ(Jin x Hin) = Vhin

– J = Number of jobs– H = Average hours worked per job– Vh = Volume of hours worked– Where i= industry and n=class of worker

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Similar surveys in both countries…

Canada Household surveys :

Labour Force Survey (EPA)

Establishment survey (SEPH)

Other surveys and administrative data

United States Household surveys:

Current Population Survey (CPS)

Establishment survey : Current Employment Statistics (CES)

Other surveys and administrative data

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…but different measurement challenges

Canada and United States dispose of very similar surveys to measure their population and labour market.

However, the statistical agency/ies of each country face different challenges– Geography (more borders, weather,

migration…)– Different labour regulations

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Impact on level comparisons when labour and population estimates are taken from the LFS for Canada and the CPS for the U.S. - 2000

M Item Y / H H / POP H / E E / PAT PAT / Pop

1 Canada 33.0 864.6 1766 60.6% 80.8%

1 United States 38.1 980.3 1871 66.70% 79,0%

1 Diff (Can-US (%))

-7 -13 -6 -10 3

2 Canada 32.5 877.4 1824 61.3% 78.5%

2 United States 36.2 959.1 1979 64.4% 75.3%

2 Diff (Can-US (%))

-11 -9 -8 -5 4

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Figure 1 - An Illustration of the Difference between the Concepts of J obs and Persons, Canada

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

1994 1996 1998 2000 2002 2004

Thou

sand

s

95.0

95.5

96.0

96.5

97.0

97.5

98.0

98.5

99.0

Perc

ent

J obs (Left Scale)Persons (Left Scale)Persons over J obs in Percent (Right Scale)

Sources: J obs (CPA); Persons (LFS)

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Figure 2 - An Illustration of the Difference between the Concepts of J obs and Persons, United States

-

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

1994 1996 1998 2000 2002 2004

Thou

sand

s

89.0

89.5

90.0

90.5

91.0

91.5

92.0

92.5

93.0

Perc

ent

J obs (Left Scale)Persons (Left Scale)Persons over J obs in Percent (Right Scale)

Sources: J obs (CES); Persons (CPS)

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From persons employed (LFS / CPS) to the number of jobs used in productivity accounts

  In thousands  Canada USACanada as a % of the USA

 

Persons employed LFS / CPS (1) 15 310 136 485 11.2%

+Multiple job holders LFS / CPS 756 7 691 9.8%

- Unpaid absentees 674 2 076 32.5%

+ Military personnel 82 1 464 5.6%

+Other adjustments for coverage 87 2 386 3.6%

= Number of SNA jobs (2) 15 559 145 950 10.7%

  Percentage change (2 / 1) 2% 7% -5%

Note : Employees includes incorporated self employed (SNA concept)

Self-employed includes unpaid family related workers (SNA concept)

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Accuracy of Canadian Population Estimates of the Civilian Population Using the LFS Compared with the Actual Resident

Population

20.0

21.0

22.0

23.0

24.0

25.0

26.0

27.0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Mill

ions

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Perc

ent

Resident Population 16+ (Census)Civilian Population 16+ (LFS)Ratio of LFS to Census

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Accuracy of the U.S. Civilian Population Estimates from the CPS compared to Resident population

180.0

185.0

190.0

195.0

200.0

205.0

210.0

215.0

220.0

225.0

230.0

235.0

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

Mill

ions

96.0

96.5

97.0

97.5

98.0

98.5

99.0

99.5

100.0

Perc

ent

Resident Population 16+ (Census) (Left Scale)Civilian Population 16+ (CPS) (Left Scale)Ratio CPS to Census (Right Scale)

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Consequences

The CPS measure of employment and working age population would be underestimated for part of the period

The characteristics of the population underestimated is different than the overall population– Highly hispanophone, many unauthorized

migrants and temporary migrants. Because of this underestimation, it can

potentially bias downward the employment to population ratio.

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Employment-population ratio : Canada-U.S. (when comparing household surveys)

54,0%

56,0%

58,0%

60,0%

62,0%

64,0%

66,0%

68,0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

LFS 16+ CPS 16+ LFS 15+

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Employment / population 15+ based on Canadian Productivity Accounts estimates

54.0%

56.0%

58.0%

60.0%

62.0%

64.0%

66.0%

68.0%

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004

USA

Canada

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Impact on level comparisons when hours worked from the BLS productivity growth are used for the U.S. - 2000

M Item Y / H H / POP H / E E / PAT PAT / Pop

1 Canada 33.0 864.6 1766 60.6% 80.8%

1 United States 38.1 980.3 1871 66.70% 79,0%

1 Diff (Can-US (%))

-7 -13 -6 -10 3

3 (1) Canada 33.0 864.6 1766 60.6% 80.8%

3 United States 38.1 913.1 1743 66.7% 78.6%

3 Diff (Can-US (%))

-14 -6 1 -10 3

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Adjusted vs Unadjusted Hours Worked Per Person

1700.0

1750.0

1800.0

1850.0

1900.0

1950.0

2000.0

1994 1995 1996 1997 1998 1999 2000 2001 2002

Canada-Unadjusted U.S.-UnadjustedCanada-Adjusted U.S.-Adjusted

Note: Adjusted for holidays and other specific events

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Comparing apples and oranges

What do we get for Canada if we use a similar methodology than the US productivity program?

Hours per job, 2003

U.S. Canada Difference

Adjusted CPS-LFS (BMW)

1,844.4 1,733.1 111 hours

BLS-SEPH 1,714.8 1,607.8 107 hours

Difference 130 125

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More comparable and better data

Many studies comparing Time Use Survey data collected through time diary seem to confirm that household surveys like the Labour Force Survey produce reliable and comparable estimates between countries. (UK, Canada, USA, Finland)

Some of these studies indicates as well that deriving hours worked from hours paid underestimate the hours worked. (UK study)

Our adjustment to CPS hours data reduce the annual estimate by 4,7%. An ATUS-CPS study mention that the CPS weekly data on actual hours overestimate the annual hours worked by 5%. [Frazis and Stewart, MLR, Dec 2004]

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Canadian GDP per capita relative to the United States - 1994 to 2005

80

82

84

86

88

90

92

94

96

98

100

1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005

U.S. = 100

GDP per capitaLabour productivityHours worked per capita

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Concluding remarks

What is the level of GDP per capita in Canada? How does it compare to that of the U.S.? To what extent labour productivity or work intensity contributes to it?

Answering these questions involves an empirical exercise that seems simple since it depends only on a small number of variables – GDP, population, employment and hours that have been published on a regular basis since World War II by most statistical agencies.

But in reality, making international comparisons even between countries as similar as Canada and the United States is not simple. Statistical agencies produce different variants of these primary indicators for different purposes and analysts that focuses on international comparisons should be very careful about the international comparability of these indicators.