6. Employment Multipliers and the Measurement of Labor Productivity

There have been numerous attempts to measure total employment effects and productivity indexes since the early work of Leontief (1944). These measurements have been based on the Leontief inverse (I − A) ^{− 1} of recorded input–output tables. Examples of this are Bezdek’s (1973) manpower analysis and the employment multiplier study of Diamond (1975). However, not much attention has been paid in these investigations to the derivation of the coefficients of the input–output matrix A, although at least two fundamentally different procedures exist in this respect. This may be due to the fact that the two procedures lead to different input–output tables only when subsidiary production is present in the classification of industries and commodity groups. The objective of this chapter is to show that these two input–output accounting schemes, recommended by the United Nations (1968) in the case of insufficient information about subsidiary production, generate two different measures of total factor requirements (Sect. 6.2). In the Sect. 6.3 attention is focused on the case of pure joint production. Sraffa’s interpretation of joint production and employment multipliers is summarized and a new concept of average labor content, or in reciprocal form: of labor productivity, is introduced and compared. It is shown in Sect. 6.4 then, that the UN method for calculating total labor requirements per dollar of output value from input–output tables leads either to Sraffa’s or to the new interpretation of physical total input requirements, depending on how the A matrix is derived. Subsequent sections examine additional properties of these employment multiplier calculations and productivity concepts.