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Subjects > Unit Labour Costs
OECD System of Unit Labour Cost Indicators
| .UL....... | Contact person/organisation
OECD statistics contact: stat.contact@oecd.org
Sector coverage
This system provides annual and quarterly time series of unit labour cost indicators and related series for the following economic activities according to the International Standard Industrial Classification (ISIC Rev. 3):
- Total economy
- Manufacturing (ISIC D)
- Industry (ISIC C_E)
- Construction (ISIC F)
- Trade, transport and communication (ISIC G_I)
- Finance and business services (ISIC J_K)
- Market services (ISIC activity based proxy G_K)
- Business sector excluding agriculture (ISIC activity based proxy C_K)
Related Links: ISIC Rev. 3
Key statistical concept
Unit labour costs (ULCs) measure the average cost of labour per unit of output. They are calculated as the ratio of total labour costs to real output, or equivalently, as the ratio of mean labour costs per hour to labour productivity (output per hour). As such, a ULC represents a link between productivity and the cost of labour in producing output. The OECD System of Unit Labour Cost Indicators calculates annual and quarterly ULC measures and related indicators (e.g. indices of labour productivity) according to a specific methodology to ensure data are comparable across countries.
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Annual Total Labour Costs
| .ULABAC....... | Key statistical concept
The target variable for annual total labour costs is compensation of employees (COE) compiled according to the System of National Accounts 1993, adjusted for the self employed by multiplying COE by the ratio of total hours worked by all persons in employment to total hours worked by all employees of businesses. This target variable covers a significant part of total labour costs such as wages and salaries; bonuses; payments in kind related to labour services (e.g. food, fuel, housing); severance and termination pay and employers' contributions to pension schemes, casualty and life insurance and workers compensation. However, COE excludes some relevant items of total labour cost such as the cost of employee training, welfare amenities and recruitment; taxes on employment (e.g. payroll tax) and fringe benefits tax. Furthermore, the adjustment for the self employed assumes that labour compensation per hour or per person is equivalent for the self employed and employees of businesses. This assumption may be more or less valid across different countries and economic activities. In the interest of producing the longest possible time series for annual total labour costs, current series are often linked to related historical time series provided to the OECD sometime in the past. As a result time series extend back to 1970 for most OECD Member countries. The variables and their sources used for each country and economic activity are noted in the country metadata under the heading ‘Sources'.
Aggregation and consolidation
Total labour costs for economic activities G_K (Market Services) and C_K (Business Sector) are compiled by summing their respective activity components.
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Annual Real Output
| .ULABRV....... | Key statistical concept
The target variable for annual real output is constant price value added compiled according to the System of National Accounts 1993. In the interest of producing the longest possible time series for annual real output, current series are often linked to related historical time series provided to the OECD sometime in the past. As a result time series extend back to 1970 for most OECD Member countries. The variables and their sources used for each country and economic activity are noted in the country metadata under the heading 'Sources'.
Aggregation and consolidation
All volume series of real output are re-referenced such that the national currency series are expressed in prices of the prevailing OECD base year. Series for activity aggregates G_K and C_K are compiled through annual chain linking of their respective components, using current price value added data as weights.
Other manipulations
The real output of activity J_K is adjusted to remove the (estimated) component attributed to the services provided by a dwelling to its occupants as this activity has no associated labour input. For a detailed explanation of this issue and the methodology used to perform the adjustment, see: Adjustment for ownership of dwellings. Consequently the published time series of real output for activities, J_K, G_K and C_K will differ from related national source data.
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Annual Unit Labour Costs
| .ULABUL....... | Key statistical concept
Annual unit labour costs (ULCs) are calculated as the quotient of total labour costs and real output. Time series are presented in both level and index form where the base year of real output is 2005.
Recommended uses and limitations
Every effort has been made to ensure that data are comparable across countries. Therefore cross country comparisons of unit labour cost levels (in ratio form) can be used for static analysis (i.e. comparison of unit labour cost levels across countries or economic activities at a point in time) together with indexes which show comparable development in unit labour costs over time. However, for some countries unit labour cost levels are not presented due to a lack of data to make an adjustment for the self-employed. For these countries only unit labour cost indexes are made available for analysis. Furthermore, the adjustment for the self employed assumes that labour compensation per hour or per person is equivalent for the self employed and employees of businesses. This assumption may be more or less valid across different countries and economic activities thus affecting the comparability of unit labour cost level data.
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Annual Labour Compensation per Employee
| .ULAICE....... | Key statistical concept
Labour compensation per employee is defined in this database as compensation of employees divided by total employees. Data series are available for all countries except Iceland and Switzerland.
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Annual Labour Compensation per Hour
| .ULAICH....... | Key statistical concept
Labour compensation per hour is defined in this database as compensation of employees divided by total hours worked by employees. Data is available for the following countries: Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain, Sweden and the United States.
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Annual Labour Compensation per Unit Labour Input
| .ULAICU....... | Key statistical concept
Labour Compensation per unit labour input is defined in this database as compensation of employees divided by total hours worked by employees of businesses (Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain and Sweden) or total employees of businesses (all other countries).
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Annual Exchange Rate Adjusted ULC
| .ULAIEU....... | Estimation
The annual exchange rate adjusted ULC measure is obtained by converting total labour costs to a USD basis and dividing this by a real output series which is also $US converted using the prevailing exchange rates in the OECD base year.
Recommended uses and limitations
Exchange rate adjusted unit labour costs can be useful to compare developments in unit labour costs across countries in a common currency. Short-term movements can be very volatile as they are largely dependent on developments in the exchange rate.
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Annual Labour Productivity per Person Employed
| .ULAILE....... | Key statistical concept
Labour productivity per person employed is defined in this dataset as real output (gross value added) divided by total employed persons. Data series are available for all countries except Iceland.
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Annual Labour Productivity per Hour
| .ULAILH....... | Key statistical concept
Labour productivity per hour is defined in this dataset as real output (gross value added) divided by total hours worked by all persons in employment. Data is available for the following countries: Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain, Sweden and Switzerland.
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Annual Labour Productivity per Unit Labour Input
| .ULAILP....... | Key statistical concept
Labour Productivity is defined in this dataset as real output divided by total labour input. The labour input measure used is total hours worked by those in employment for Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain, Sweden and Switzerland. For all other countries total employment in persons is used as the labour input measure.
Recommended uses and limitations
The main purpose of the Labour Productivity measure compiled through the OECD System of Unit Labour Cost Indicators is to enable users to decompose movements in the annual Unit Labour Cost into a numerator which shows Labour Compensation per Unit Labour Input and a denominator which shows Labour Productivity.
Estimates of Labour Productivity are very sensitive to the quality of data used for the labour input measure. This issue is explained in depth in the OECD Productivity Database which also presents measures of Labour Productivity at the Total Economy level which may differ from those shown in this database for some countries. The main source of this difference is the labour input measure used. The OECD Productivity Database uses total hours worked as the labour input measure for all countries where this is defined as the product of series for average hours per worker or per job multiplied by total number of workers or the total number of jobs. National accounts are the default for this data, complemented by data from labour force surveys for those countries and years for which national accounts provide no information on hours worked. By contrast, all labour input data (i.e. total hours worked or total employment) used for this database is sourced from the OECD System of National Accounts Database. This implies that where a country has only a short-time series of hours worked data available, the historical series will have been linked to the series on total employment. The period for which hours worked data is available in those countries where it is used as the labour input measure is shown in the country data sources.
There are other minor reasons which may also lead to discrepancies between the Labour Productivity measures presented at the Total Economy level between the two respective databases. A detailed description of these reasons and an analysis of discrepancies on a country by country basis are available on request.
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Annual Labour Compensation per Employee $US (PPP adjusted)
| .ULAIPE....... | Key statistical concept
$US (PPP adjusted) Labour compensation per employee is defined in this dataset as compensation of employees converted from national currency to $US using private consumption purchasing power parities, divided by total employees.
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Annual Labour Compensation per Hour $US (PPP adjusted)
| .ULAIPH....... | Key statistical concept
$US (PPP adjusted) Labour compensation per hour is defined in this dataset as compensation of employees converted from national currency to $US using private consumption purchasing power parities, divided by total hours worked by employees. Data is available for the following countries: Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain, Sweden and the United States.
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Annual Labour Compensation per Unit Labour Input $US (PPP adjusted)
| .ULAIPU....... | Key statistical concept
$US (PPP adjusted) Labour compensation per unit labour input is defined in this dataset as compensation of employees converted from national currency to $US using private consumption purchasing power parities, divided by total hours worked by employees (for Australia, Austria, Bulgaria, Canada, Cyprus, Czech Republic, Denmark, Estonia, France, Germany, Greece, Hungary, Ireland, Italy, Korea, Lithuania, Mexico, Netherlands, Norway, Slovak Republic, Spain and Sweden) and total employees for all other countries. Note, for those countries with hours worked data, where a longer time series for total employees exists the data is linked to extend the time series.
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Annual Labour Income Share (Real ULC)
| .ULAIRU....... | Key statistical concept
The annual labour income share is calculated for this database as total labour costs divided by nominal output. The term labour income share is used as the total labour costs measure relates to compensation of employees adjusted for the self employed and thus essentially relates to labour income.
The division of total labour costs by nominal output is sometimes also referred to as a real unit labour cost - as it is equivalent to a deflated unit labour cost where the deflator used is the GDP implicit price deflator for the economic activity (i.e. sector) concerned.
Recommended uses and limitations
The adjustment for the self employed made in the calculation of total labour costs assumes that labour compensation per hour (or per person if hours data is not available) is equivalent for the self employed and employees of businesses. This assumption may be more or less valid across different countries and economic activities and thus can affect the reliability (and thus comparability) of the resulting labour income share ratios.
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Annual self employment ratio
| .ULAR....... | Key statistical concept
The self-employment ratio (either using 'hours worked' or 'persons') is calculated simply as: Total employment divided by employees. The resulting ratio gives the user an understanding of the proportion of the self-employed to employees in total employment. Looked across economic activities over time, the ratio can also give the user an understanding of the changing self-employed/employee composition of the country's labour force.
The ratio is based on hours worked data for Australia, Austria, Bulgaria, Canada, Cyprus, Denmark, Estonia, France, Germany, Greece, Hungary, Italy, Korea, Lithuania, Netherlands, Norway, Slovak Republic, Spain, and Sweden. For all other countries data on persons is used, with the exception of Iceland where data is not available to perform the calculation and Switzerland which has both 'hours worked' and 'persons' data available, but only for 'Total employment', therefore the calculation cannot be calculated.
Recommended uses and limitations
In compiling the ULC's the ratio is multiplied by compensation of employees (national accounts base) to give an adjusted compensation of employees measure more suitable for use in the Unit Labour Cost (ULC) compilation process. Compensation of employees as defined in the national accounts does not include labour compensation for the self-employed which is covered in the item 'operating surplus and mixed income'. However, the output of the self-employed contributes to value added and thus introduces an inconsistency between the numerator and denominator when deriving ULC indexes. If an adjustment is not made to the labour compensation measure to account for the impact of the self-employed, this has the potential to distort the comparability of ULC indexes across countries if there are large differences in the level or, more importantly, changes over time in the number of self-employed persons across countries. Also, this impact is likely to vary across industries, as some industries are more likely to have a higher proportion of self-employed (e.g. Agriculture) than others.
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Annual Nominal Output
| .ULAWVC....... | Key statistical concept
Annual nominal output is current price value added compiled according to the SNA 93.
Aggregation and consolidation
Annual Nominal Output series are used as weights when compiling annually chain linked Real Output series for economic activities G_K (Market Services) and C_K (Business Sector). The Annual Nominal Output series for each economic activity are also used as the denominator for the Labour Income Share ratio - also known as the Real Unit Labour Cost.
Other manipulations
The real output of activity J_K is adjusted to remove the (estimated) component attributed to the services provided by a dwelling to its occupants as this activity has no associated labour input. For a detailed explanation of this issue and the methodology used to perform the adjustment, see: Adjustment for ownership of dwellings. Consequently the published time series of real output for activities, J_K, G_K and C_K will differ from related national source data.
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Quarterly Total Labour Costs - Benchmarked
| .ULQBBC....... | Key statistical concept
The target variable for the quarterly indicator of total labour costs is compensation of employees compiled according to the SNA 93. Where this variable is not available a suitable proxy is sought, with the following general order of preference: gross wages and salaries; labour cost index multiplied by an appropriate total labour input measure (i.e. total hours worked or total employment / employees); average hourly / weekly / monthly earnings multiplied by an appropriate total labour input measure. Further details on where proxy variables have been used for particular countries and an evaluation of their quality can be found at: Quality evaluation of quarterly proxy variables for total labour costs.
In the interest of producing the longest possible time series for the quarterly indicators, current series are often linked to related historical time series provided to the OECD sometime in the past. The variables and their sources used for each country are noted in the country metadata under the heading ‘Sources'.
Aggregation and consolidation
Quarterly indicators of total labour costs for economic activities (i.e. sectors) G_K and C_K are compiled by either summing their respective activity components or as a weighted aggregation of proxy indices for the components. The quarterly indicator of total labour costs for each economic activity is then benchmarked to the annual total labour costs time series to compile a temporally disaggregated quarterly time series of total labour costs in national currency, which is the series published. The temporal disaggregation (benchmarking) methodology used is that of Fernández, see Fernández R.B. (1981), A methodological note on the estimation of time series, The Review of Economics and Statistics, 63: 471-478. This methodology is used via the software ‘ECOTRIM' designed by Eurostat.
Quality comments
The temporally disaggregated quarterly time series of total labour costs does not cover some aspects of labour costs such as the cost of employee training and recruitment and taxes on employment (e.g. payroll tax).
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Quarterly Unit Labour Costs
| .ULQBBU....... | Key statistical concept
Unit labour costs (ULC) measure the average cost of labour per unit of output and are calculated as the ratio of total labour costs to real output.
Estimation
Raw quarterly unit labour costs are calculated as the quotient of the temporally disaggregated (benchmarked) quarterly time series of total labour costs and real output. This raw ULC is then seasonally adjusted using the TRAMO-SEATS package. In addition to the seasonally adjusted series, TRAMO-SEATS produces a Trend-Cycle series which includes all non-seasonal and non-irregular movements in the underlying time series. This series can be regarded as a smoothed seasonally adjusted series, where the degree of smoothing is dependent on the underlying ARIMA model and will thus vary from series to series. Quarterly unit labour cost indexes in OECD base year are available in raw, seasonally adjusted and trend-cycle form. Furthermore quarter-on-previous-quarter and annual rates of change are presented for the seasonally adjusted and trend-cycle series.
Seasonal adjustment
Seasonal adjustment is performed using the TRAMO-SEATS package. The seasonal model for each series is reviewed annually. For quarterly updates within each year the model is held constant but the parameters (coefficients) are allowed to vary - referred to as concurrent adjustment. If major revisions to input quarterly indicator series are observed then model re-identification may be undertaken.
Other manipulations
In the interest of producing long time series for empirical analysis, the quarterly unit labour cost index trend-cycle series for each economic activity have been extended to have the same length as the corresponding annual series (i.e. in most cases back to 1970). This has been achieved by interpolating the annual unit labour cost index to create a quarterly series using the Denton temporal disaggregation technique. This interpolated quarterly series is then linked to the actual quarterly trend unit labour cost index to extend this time series at the point where quarterly indicator data is no longer available. This linked part of the trend series is clearly indicated with a control code of ‘E' in all electronic outputs. The structure of the trend series may often appear different after the link point, given that the most recent years of the time series are derived from an ARIMA model and the historical linked part is an interpolated annual series.
Recommended uses and limitations
The OECD has performed extensive testing of the TRAMO-SEATS trend-cycle methodology and found that it significantly reduces the volatility of estimated quarter-on-previous-quarter rates of change whilst still effectively extracting the underlying signal in the raw data. Due to the volatility inherent in a derived series such as the ULC, the OECD recommends the trend-cycle series be used for the purpose of short-term analysis, in particular when interpreting the latest movements in the quarterly series.
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Quarterly Real Output - Benchmarked
| .ULQBBV....... | Key statistical concept
The target variable for quarterly real output is constant price value added compiled according to the SNA93. Where this variable is not available a production index covering the respective economic activities is sought. Further details on where proxy variables have been used for particular countries and an evaluation of their quality can be found at: Quality evaluation for quarterly proxy variables of real output.
In the interest of producing the longest possible time series for the quarterly indicators, current series are often linked to related historical time series provided to the OECD sometime in the past. The variables and their sources used for each country are noted in the country metadata under the heading sources.
Aggregation and consolidation
Quarterly indicators of real output for economic activities (i.e. sectors) G_K and C_K are compiled by either summing their respective activity components or as a weighted aggregation of proxy indices for the components. The quarterly indicator of real output for each economic activity is then benchmarked to an annual real output time series to compile a temporally disaggregated quarterly time series of real output in national currency, which is the series published. The temporal disaggregation (benchmarking) methodology used is that of Fernández, see Fernández R.B. (1981), A methodological note on the estimation of time series, The Review of Economics and Statistics, 63: 471-478. This methodology is used via the software ‘ECOTRIM' designed by Eurostat. Annual data used as the benchmark for the temporal disaggregation procedure for activities G_K and C_K are aggregated using an annual chain-linking methodology. As a result the temporally disaggregated quarterly time series of real output will inherit this effect.
Other manipulations
The real output of activity J_K is adjusted to remove the (estimated) component attributed to the services provided by a dwelling to its occupants as this activity has no associated labour input. For a detailed explanation of this issue and the methodology used to perform the adjustment, see: Adjustment for ownership of dwellings. Consequently the published time series of real output for activities, J_K, G_K and C_K will differ from related national source data.
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Quarterly total labour costs - Raw Data
| .ULQC....... | Validation
Quality evaluation for quarterly proxy variables of total labour costs
Unit Labour Costs (ULC) are calculated as the ratio of total labour costs to real output. In the OECD System of Unit Labour Cost Indicators the target variable for the quarterly indicator of total labour costs is compensation of employees compiled according to the System of National Accounts 1993 (SNA93). Where this target variable is not available a suitable proxy is sought, with the following general order of preference: gross wages and salaries; labour cost index multiplied by total hours worked; average earnings multiplied by total employment.
Where the use of proxy variables is required, an indicator of their quality can be determined by evaluating the correlation between annual growth rates in the proxy indicator and that of the SNA93 benchmark data. The following table (as collated on 16 March 2007) presents these correlations and also describes the type of proxy variable used. The correlations give an indication of the reliability of the total labour cost proxy variable used in the compilation of the ULC for the relevant country and economic activity. A low correlation implies that users should take caution when viewing the resultant quarterly ULC prior to reconciliation with annual benchmark data (which generally occurs with a 12-18 month lag). However the following processes used in the OECD System of Unit Labour cost Indicators also need to taken into account when understanding how these proxy variables are treated: - Benchmarking: As part of the compilation, all quarterly variables are benchmarked (temporally disaggregated) against annual SNA93 values; and for all countries SNA93 data is available. This benchmarking procedure, using the Fernandez method in the software package Ecotrim, will in simple terms ensure that the proxy quarterly total labour cost value has a correlation of 1 with the annual value for the overlapping period. As part of the Fernandez method also, the quarterly end points where there is no supporting annual data will in essence be smoothed and trend towards the long-term series average.
- Seasonal adjustment: The final quarterly ULC are seasonally adjusted using the TRAMO-SEATS method in the software package Demetra. In addition to the seasonally adjusted series, TRAMO-SEATS produces a trend-cycle series that includes all non-seasonal and non-irregular movements in the underlying time series. This series can be regarded as a smoothed seasonally adjusted series, where the degree of smoothing is dependent on the underlying ARIMA model.
The OECD has performed extensive testing of both the Fernandez and TRAMO-SEATS methodologies. These methodologies together ensure that the quarterly series is in line with the countries authoritative annual SNA93 data and the quarterly volatility is reduced but at the same time effectively extracting the underlying signal from the raw data.
Country - Activity | Quarterly Proxy Variable | Overlap | Correlation | Australia - Manufacturing | Survey of Wages and Salaries | 1984-2005 | 0.826 | Australia - Industry | Survey of Wages and Salaries | 1984-2005 | 0.847 | Australia - Construction | Survey of Wages and Salaries | 1984-2005 | 0.565 | Australia - Trade, transport, and communication | Survey of Wages and Salaries | 1984-2005 | 0.746 | Australia - Finance and business services | Survey of Wages and Salaries | 1984-2005 | 0.824 | Australia - Market services | Survey of Wages and Salaries | 1984-2005 | 0.851 | Australia - Business sector | Survey of Wages and Salaries | 1984-2005 | 0.921 | Belgium - Manufacturing | Gross Wages and Salaries Index | 1981-2005 | 0.847 | Canada - Manufacturing | Survey of Wages and Salaries | 1971-2002 | 0.993 | Canada - Industry | Survey of Wages and Salaries | 1971-2002 | 0.990 | Canada - Construction | Survey of Wages and Salaries | 1971-2002 | 0.976 | Canada - Trade, transport, and communication | Survey of Wages and Salaries | 1971-2002 | 0.981 | Canada - Finance and business services | Survey of Wages and Salaries | 1971-2002 | 0.897 | Canada - Market services | Survey of Wages and Salaries | 1971-2002 | 0.974 | Canada - Business sector | Survey of Wages and Salaries | 1971-2002 | 0.989 | Japan - Manufacturing | Monthly Labour Survey | 1971-2005 | 0.981 | Japan - Industry | Monthly Labour Survey | 1991-2005 | 0.866 | Japan - Construction | Monthly Labour Survey | 1991-2005 | 0.628 | Japan - Trade, transport, and communication | Monthly Labour Survey | 1991-2005 | 0.432 | Japan - Finance and business services | Monthly Labour Survey | 1991-2005 | 0.746 | Japan - Market services | Monthly Labour Survey | 1991-2005 | 0.500 | Japan - Business sector | Monthly Labour Survey | 1991-2005 | 0.801 | Korea - Total economy | Monthly Labour Survey | 1990-2005 | 0.874 | Korea - Manufacturing | Monthly Labour Survey | 1993-2004 | 0.800 | Korea - Industry | Monthly Labour Survey | 1994-2004 | 0.803 | Korea - Construction | Monthly Labour Survey | 1994-2004 | 0.655 | Korea - Trade, transport, and communication | Monthly Labour Survey | 1994-2004 | 0.760 | Korea - Finance and business services | Monthly Labour Survey | 1994-2004 | 0.512 | Korea - Market service | Monthly Labour Survey | 1994-2004 | 0.799 | Korea - Business sector | Monthly Labour Survey | 1994-2004 | 0.848 | Mexico - Manufacturing | Compilation Index1 | 1981-2004 | 0.982 | New Zealand - Total Economy | Earnings and Employment Survey | 1990-2004 | 0.934 | New Zealand - Manufacturing | Earnings and Employment Survey | 1990-2002 | 0.925 | New Zealand - Industry | Earnings and Employment Survey | 1990-2002 | 0.957 | New Zealand - Construction | Earnings and Employment Survey | 1990-2002 | 0.727 | New Zealand - Trade, transport, and communication | Earnings and Employment Survey | 1990-2002 | 0.843 | New Zealand - Finance and business services | Earnings and Employment Survey | 1990-2002 | 0.894 | New Zealand - Market services | Earnings and Employment Survey | 1990-2002 | 0.900 | New Zealand - Business sector | Earnings and Employment Survey | 1990-2002 | 0.959 | Portugal - Manufacturing | Gross Wages and Salaries Index | 1996-2006 | 0.718 | Portugal - Industry | Gross Wages and Salaries Index | 1996-2006 | 0.747 | Portugal - Construction | Gross Wages and Salaries Index | 2001-2006 | 0.273 | Portugal - Market services | Compilation Index2 | 2001-2006 | 0.278 | Portugal - Business sector | Compilation Index2 | 2001-2006 | 0.718 | | Romania - Total Economy | Compilation Index3 | 2000-07 | 0.822 | | Romania - Manufacturing | Gross Wages and Salaries Index | 1999-2005 | 0.493 | | Romania - Industry | Gross Wages and Salaries Index | 1999-2005 | 0.664 | | Romania - Construction | Gross Wages and Salaries Index | 1999-2005 | 0.817 | | Romania - Trade, transport and communication | Compilation Index3 | 2000-05 | 0.818 | | Romania - Financial and business services | Compilation Index3 | 2000-05 | 0.093 | | Romania - Market services | Compilation Index3 | 2000-05 | 0.835 | | Romania - Business sector | Compilation Index3 | 2000-05 | 0.832 | United States - Manufacturing | Current Employment Statistics Survey | 1971-2005 | 0.938 | United States - Industry | Current Employment Statistics Survey | 1971-2005 | 0.939 | United States - Construction | Current Employment Statistics Survey | 1971-2005 | 0.926 | United States - Trade, transport, and communication | Current Employment Statistics Survey | 1973-2005 | 0.789 | United States - Finance and business services | Current Employment Statistics Survey | 1973-2005 | 0.827 | United States - Market services | Residual Compilation4 | 1971-2005 | 0.900 |
Notes:
For Japan, Korea, and the United States, the proxy is the multiplicative sum of: average earnings; and, number of employees.
For Belgium, Portugal and Romania - data is sourced via Eurostat. Footnotes:
1. Compilation index for Manufacturing is the multiplicative sum of: Average earnings; average weekly hours of work; and, number of employees.
2 Compilation index for Market Services and the Business Sector is the multiplicative sum of: Labour cost index and Number of employees.
3. Compilation index is the product of: Labour cost index for the activity and number of employees for the activity.
4. Market Services for the US is a residual calculation compiled as: the Business Sector minus Industry minus Construction. The calculation (and the correlation) takes place after the benchmarking procedure. For more metadata see: USA Unit Labour Cost Metadata
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Quarterly real output - Raw Data
| .ULQV....... | Validation
Quality evaluation for quarterly proxy variables of real output
Unit Labour Costs (ULC) are calculated as the ratio of total labour costs to real output. In the OECD System of Unit Labour Cost Indicators the target variable for the quarterly indicator of real output is constant price value added compiled according to the System of National Accounts 1993 (SNA93). Where this target variable is not available a production index covering the respective economic activity is sought.
Where the use of proxy variables is required, an indicator of their quality can be determined by evaluating the correlation between annual growth rates in the proxy indicator and that of the SNA93 benchmark data. The following table (as collated on 16 March 2007) presents these correlations and also describes the type of proxy variable used. The correlations give an indication of the reliability of the quarterly real output proxy variable used in the compilation of the ULC for the relevant country and economic activity. A low correlation implies that users should take caution when viewing the resultant quarterly ULC prior to reconciliation with annual benchmark data (which generally occurs with a 12-18 month lag). However the following processes used in the OECD System of Unit Labour cost Indicators also need to taken into account when understanding how these proxy variables are treated: - Benchmarking: As part of the compilation production process of the OECD System of Unit Labour Cost Indicators, all quarterly variables are benchmarked (temporally disaggregated) against annual SNA93 values; and in all cases SNA93 data is available. This benchmarking procedure, using the Fernandez method in the software package Ecotrim, will in simple terms ensure that the quarterly proxy of real output has a correlation of 1 with the annual value for the overlapping period. As part of the Fernandez method also, the quarterly end points where there is no supporting annual data will in essence be smoothed and trend towards the long-term series average.
- Seasonal adjustment: The final ULC are seasonally adjusted using the TRAMO-SEATS method in the software package Demetra. In addition to the seasonally adjusted series, TRAMO-SEATS produces a trend-cycle series that includes all non-seasonal and non-irregular movements in the underlying time series. This series can be regarded as a smoothed seasonally adjusted series, where the degree of smoothing is dependent on the underlying ARIMA model.
The OECD has performed extensive testing of both the Fernandez and TRAMO-SEATS methodologies. These methodologies together ensure that the quarterly series is in line with the countries authoritative annual SNA93 data and the quarterly volatility is reduced but at the same time effectively extracting the underlying signal from the raw data.
Country - Activity | Quarterly Proxy Variable | Overlap | Correlation | Belgium - Manufacturing | Industrial Production Index | 1971-2004 | 0.727 | Ireland - Manufacturing | Industrial Production Index | 1977-2005 | 0.867 | Japan - Manufacturing | Industrial Production Index | 1971-2005 | 0.900 | Japan - Industry | Industrial Production Index | 1971-2005 | 0.891 | Japan - Construction | Industrial Production Index | 1971-2005 | 0.702 | | Japan - Trade communication | Index of Services Production | 1981-2006 | 0.688 | | Japan - Financial Services | Index of Services Production | 1981-2006 | 0.573 | Japan - Market Services | Aggregation of activity Service indices | 1979-2006 | 0.518 | Japan - Business Sector | Aggregation of activity indices | 1979-2006 | 0.838 | | Romania - Manufacturing | Industrial Production Index | 2000-05 | 0.766 | United States - Manufacturing | Industrial Production Index | 1971-2005 | 0.898 | United States - Industry | Industrial Production Index | 1971-2005 | 0.898 | United States - Construction | Industrial Production Index | 1971-2005 | 0.526 | United States - Market Services | Residual Compilation1 | 1971-2005 | 0.799 |
Footnotes:
1. The Market Services Residual Compilation for the United States is compiled as: the Business Sector minus Industry minus Construction. The calculation (and the correlation) take place after the benchmarking procedure. For more metadata see: USA Unit Labour Cost Metadata
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