There have been some concerns that the current measurement scheme for labor productivity, based on obtaining the ratio of total output to total employment, may not be an adequate measurement scheme.  Consequently, the objective of this research undertaking is to propose and develop an alternative labor productivity measure (at the macro level).  

Toward this end, this paper firstly provides a discussion of productivity measurement, both multifactor and partial productivity, in relation to the notion of production functions.  The paper then focuses on labor productivity measure, including its computing formula, variables, data sources, gaps and limitations involved in its current measurement.  An inventory of current government agencies involved in labor productivity measurement is also provided.

The paper shows that trends in labor productivity do not dramatically change with the adoption of total hours worked as against total employment.  A plan for an alternative labor productivity measure, based on obtaining the ratio of the gross value added to an adjusted form of total hours workers, is then proposed.  The adjustment on total hours worked takes into account the calculation of a labor input index, which serves to incorporate labor quality by using earnings data and hours at work disaggregated by sex and major occupation across sectors.  Computations for the labor input index are made for the national and various sectoral levels from 1988 up to the currently available 1995 data.  A comparison of the current and alternative labor productivity measurement show that the current scheme may even is over stating the actual levels of labor productivity.  This is particularly true for the wholesale and retail trade, financing and services sectors.

Since the proposed measure may serve to capture the notion of labor input more accurately in terms of the contribution of part-time and full-time employment than the current measure which only considers total employment, it is suggested that the proposed measure be adopted for institutionalisation.  Furthermore, calculations on the labor input index serve as contribution to the current multifactor productivity measure being developed and institutionalised in the Philippines.  Moreover, the results of the study can serve toward development of insights on whether growth in average earnings in the national and sectoral levels has matched labor productivity, and whether some government interventions ought to be carried out.