Productive and Unproductive Labour - National Accounts

National Accounts

In national accounts and social accounting theory the concepts of productive and unproductive labour do survive to some extent.

• The first reason is that if we want to estimate and account for the value of the net new output created by a country in a year, we must be able to distinguish between sources of new value added and conserved or transferred value. In other words, we need a value-theoretic principle which guides us in relating, grouping and computing price-aggregates. It is obvious that if products or incomes are merely exchanged or transferred between A and B, then the total product value, or total income, does not increase; all that has happened here is, that they have been shifted around, and redistributed. Total wealth has not increased, no new value was added. By implication, some activities add new value, others do not.
• Secondly, it is necessary to create an operational statistical coverage of production itself, which can be used to allocate incomes, activities and transactions in the economy as either belonging to "production", or falling outside "production". Thus, some work produces something in the economic sense, other work does not. In general, national accounts adopt a very wide definition of production; it is defined as any activity of resident "institutional units" (enterprises, public services, households) combining the factors of production (land, labour and capital) to transform inputs into outputs. This includes both market production as well as non-market production, if it recognisably generates an income. The advantage of the wide definition is, that practically all flows of production-related income can be captured (but at the same time a large amount of unpaid work -housework and voluntary work - is not accounted for). Nevertheless, some incomes are ruled out of production and regarded as transfers of wealth. A transfer is defined basically as a payment made or income received without providing any good, service or asset in return, for example: government benefits. Some forms of interest on loans, some property rents, and most capital gains on financial assets and property are also excluded, they are effectively transfers (flows of income and expenditure which are regarded as unrelated to production and to the value of new output) or intermediate expenditure.
• Thirdly, national accounts will show the contribution of different economic sectors to the total national product or national income. These sectors are mainly output-defined (e.g. agriculture, manufacturing, business services, government administration). It is therefore possible to distinguish to some extent between "productive" activities producing some tangible product or service, and other commercial or government activities which do not (yet generate incomes).

A large amount of work done in society is not captured in national accounts, because it is unpaid voluntary labour or unpaid household labour. The monetary value of this work can be estimated only from time use surveys. Thus, national accounting definitions of "production" are strongly biased towards activities which yield a money-income.