Productivity, or more accurately labour productivity, is a measure of how effective workers are at producing output. There are different ways of measuring it. Two of the most common are real GDP per worker and real GDP per hour worked.

GDP in different countries is measured in different currencies. This doesn’t matter for comparisons of productivity growth rates because growth rates are expressed in percentage terms – the original, different currency units drop out in the calculation of the percentage.

Comparisons of the levels of productivity are however more difficult. One solution would be to use the current exchange rate between the two currencies; but exchange rates can fluctuate sharply and make productivity comparisons based on them volatile and unreliable. A better method, which is the one used by the ONS for the data series present here, is to convert local currency based measures of GDP using so-called purchasing power parity (PPP) exchange rates. These are the exchange rates that would need to prevail for similar bundles of goods in the two countries to sell for the same amount when expressed in a common currency.

The ratio of one country’s nominal GDP per worker or per hour – expressed now in a common currency – to that of, say, the UK’s equivalent variable – expressed in the same currency – is an indicator of how much higher the country’s productivity is compared with the UK’s.

Commentary - Productivity

The commentary reviews productivity trends in the UK and compares them with those of other countries.

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