Productivity

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Productivity in general [1] is the rate at which a company or country makes goods, usually judged in connection with the number of people and the amount of materials necessary to produce the goods:

  • Studies show that if a working environment is pleasant, productivity increases.
  • a productivity bonus/incentive
  • Productivity in the steel industry improved by five percent last year.

Productivity [2], in economics, measures output per unit of input, such as labor, capital or any other resource – and is typically calculated for the economy as a whole, as a ratio of gross domestic product (GDP) to hours worked. Labor productivity may be further broken down by sector to examine trends in labor growth, wage levels and technological improvement. Corporate profits and shareholder returns are directly linked to productivity growth.

At the corporate level, where productivity is a measure of the efficiency of a company's production process, it is calculated by measuring the number of units produced relative to employee labor hours or by measuring a company's net sales relative to employee labor hours. The classic productivity definition [3] is “a way to measure efficiency.” In an economic context, productivity is how to measure the output that comes from units of input.

Understanding Productivity[edit]

Productivity is the key source of economic growth and competitiveness. A country’s ability to improve its standard of living depends almost entirely on its ability to raise its output per worker, i.e., producing more goods and services for a given number of hours of work. Economists use productivity growth to model the productive capacity of economies and determine their capacity utilization rates. This, in turn, is used to forecast business cycles and predict future levels of GDP growth. In addition, production capacity and utilization are used to assess demand and inflationary pressures.

Labor Productivity[edit]

The most commonly reported productivity measure is labor productivity published by the Bureau of Labor Statistics. This is based on the ratio of GDP to total hours worked in the economy. Labor productivity growth comes from increases in the amount of capital available to each worker (capital deepening), the education and experience of the workforce (labor composition) and improvements in technology (multi-factor productivity growth).

References[edit]

  1. "Cambridge Dictionary, Productivity".
  2. "Productivity, Investopedia".
  3. "What is productivity, Tony Robbins".