MTI uses actual hours worked to measure labour input

AHW has varied over the past five years.

The Ministry of Trade and Industry (MTI) is revitalizing the way labour productivity is measured in the country. Currently, labour productivity is measured using real value-added (VA) per worker, since the data is easier to compute and more accessible to MTI, but the new method will throw actual hours worked (AHW) into the mix.

“Using hours worked as a measure of labour input better captures the actual amount of work in the economy. This alternative measure becomes more relevant given the entry of more part-time workers in the economy in recent years, and in view of cyclical changes in hours worked by full-time employees,” says the ministry.

In a study by MTI, the ministry learned that AHW over the past five years varied in line with the economic cycle. AHW per worker climbed 1.5% in 2010, along with the economic recovery, and then fell on a cumulative basis by 3.6% between 2010 and 2014. The decline was reflected across all sectors of the economy, and it was driven predominantly by a fall in hours worked by full-time employees and in part by reliance on part-time local employees. Labour productivity growth over the four years between 2010 to 2014 and in the past half-decade was higher with the AHW per worker metric compared to real VA per worker.

The study also found that labour productivity, measured as real VA per AHW, climbed at a compounded annual growth rate (CAGR) of 2.9% from 2009 to 2014, compared to the 2.5% recorded when productivity is measured as real VA per worker. Further, real VA per AHW grew by a CAGR of 1.3% in the following four years from 2010 to 2014, higher than the 0.3% per annum for real VA per worker.

“Going forward, MTI, along with the Department of Statistics and MOM, will explore how to improve the compilation of AHW data and work towards publishing the real VA per AHW series on a regular basis,” says MTI.