Working Paper No. 280
By Venetia Bell, Pablo Burriel-Llombart and Jerry Jones
In this paper, annual indices of labour input adjusted for the education, age and gender distributions of the UK workforce are presented for the period 1975-2002. These measures show that improvement in labour quality, as proxied by education, age and gender, has added on average 0.67 percentage points per year to the growth rate in total labour input. Changes in the education distribution more than account for the improvement in labour quality, adding 0.68 percentage points per annum. Changes in the age distribution have made a much smaller contribution, adding only 0.11 percentage points to the growth rate. The rise in female participation has had a small negative effect of 0.08 percentage points, as women have had a preference for part-time work, which tends to be paid less per hour than full-time jobs. Using this evidence, the key finding of this paper is that a large proportion of growth that is usually attributed to TFP (total factor productivity) growth can be accounted for by an improvement in the quality of labour input. This result has no implications for the measurement of UK GDP growth from 1975-2002, but it does help to identify more accurately the sources of that growth.
A quality-adjusted labour input series for the United Kingdom (1975–2002)