1 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 Maynard Canadian Productivity Accounts Micro-economic Analysis Division Statistics Canada OECD Seminar, Bern, October 2006

2 Context u Mandated in the fall of 2003 to attempt a comparison of productivity levels between Canada and the United States u 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 ( ) u Canada and the United States are neighbours u The two economies are highly integrated u About 80% of Canadian external trade are with the United States.

3 Objective of this presentation u 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 : u Sometimes the best practice to compare levels between two countries consists in using a combination of labour data from different surveys u For level comparisons, we should care about the comparability of the concept, the coverage and the accuracy or quality of the labour estimates used.

4 Three different measures : gap in favour of the United States (%) LP Work Intensity GDP / Pop = Y / HH/ Pop H / E E / PatPat / Pop M1 – BMW Study M2 – LFS / CPS M3 – Official - Productivity Accounts

5 Focus is on the relative labour market performance u Source of these differences: –Average Hours worked –Employment –Population u Methodology used for BMW : u Σ Σ(J in x H in ) = Vh in –J = Number of jobs –H = Average hours worked per job –Vh = Volume of hours worked –Where i= industry and n=class of worker

6 Similar surveys in both countries… u Canada u Household surveys : Labour Force Survey (EPA) u Establishment survey (SEPH) u Other surveys and administrative data u United States u Household surveys: Current Population Survey (CPS) u Establishment survey : Current Employment Statistics (CES) u Other surveys and administrative data

7 …but different measurement challenges u Canada and United States dispose of very similar surveys to measure their population and labour market. u However, the statistical agency/ies of each country face different challenges –Geography (more borders, weather, migration…) –Different labour regulations

8 Impact on level comparisons when labour and population estimates are taken from the LFS for Canada and the CPS for the U.S MItemY / HH / POPH / EE / PATPAT / Pop 1Canada %80.8% 1United States %79,0% 1Diff (Can-US (%)) Canada %78.5% 2United States %75.3% 2Diff (Can-US (%))

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11 From persons employed (LFS / CPS) to the number of jobs used in productivity accounts In thousands CanadaUSA Canada as a % of the USA Persons employed LFS / CPS (1) % + Multiple job holders LFS / CPS % - Unpaid absentees % + Military personnel % + Other adjustments for coverage % = Number of SNA jobs (2) % 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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14 Consequences u The CPS measure of employment and working age population would be underestimated for part of the period u The characteristics of the population underestimated is different than the overall population –Highly hispanophone, many unauthorized migrants and temporary migrants. u Because of this underestimation, it can potentially bias downward the employment to population ratio.

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17 Impact on level comparisons when hours worked from the BLS productivity growth are used for the U.S MItemY / HH / POPH / EE / PATPAT / Pop 1Canada %80.8% 1United States %79,0% 1Diff (Can-US (%)) (1)Canada %80.8% 3United States %78.6% 3Diff (Can-US (%))

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19 Comparing apples and oranges u What do we get for Canada if we use a similar methodology than the US productivity program? Hours per job, 2003 U.S.CanadaDifference Adjusted CPS-LFS (BMW) 1,844.41, hours BLS-SEPH 1,714.81, hours Difference130125

20 More comparable and better data u 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) u Some of these studies indicates as well that deriving hours worked from hours paid underestimate the hours worked. (UK study) u 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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22 Concluding remarks u 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? u 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. u 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.