For historical role of technology in increasing productivity, see: Productivity improving technologies (historical)

Productivity improving technologies (historical)

Productivity improving technologies date back to antiquity, with rather slow progress until the late Middle Ages. Technological progress was aided by literacy and the diffusion of knowledge that accelerated after the spinning wheel spread to Western Europe in the 13th century...

.

Workforce productivity is the amount of goods

Goods

Goods may refer to;*Good , physical product*Personal property, legal personal chattels...

 and services that a worker produces in a given amount of time. It is one of several types of productivity

Productivity

Productivity is a measure of the efficiency of production. Productivity is a ratio of what is produced to what is required to produce it. Usually this ratio is in the form of an average, expressing the total output divided by the total input...

 that economists

Economics

Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...

 measure. Workforce productivity can be measured for a firm, a process, an industry, or a country. It was originally (and often still is) called labor productivity because it was originally studied only with respect to the work of laborers as opposed to manager

Management

Management in all business and organizational activities is the act of getting people together to accomplish desired goals and objectives using available resources efficiently and effectively...

s or professional

Professional

A professional is a person who is paid to undertake a specialised set of tasks and to complete them for a fee. The traditional professions were doctors, lawyers, clergymen, and commissioned military officers. Today, the term is applied to estate agents, surveyors , environmental scientists,...

s.

The OECD defines it as "the ratio of a volume measure of output to a volume measure of input". Volume measures of output are normally gross domestic product

Gross domestic product

Gross domestic product refers to the market value of all final goods and services produced within a country in a given period. GDP per capita is often considered an indicator of a country's standard of living....

 (GDP) or gross value added

Gross value added

Gross Value Added ' is a measure in economics of the value of goods and services produced in an area, industry or sector of an economy...

 (GVA), expressed at constant prices i.e. adjusted for inflation

Inflation

In economics, inflation is a rise in the general level of prices of goods and services in an economy over a period of time.When the general price level rises, each unit of currency buys fewer goods and services. Consequently, inflation also reflects an erosion in the purchasing power of money – a...

. The three most commonly used measures of input are:

1. hours worked;
2. workforce jobs; and
3. number of people in employment.

Measured labour productivity will vary as a function of both other input factors and the efficiency with which the factors of production are used (total factor productivity). So two firms or countries may have equal total factor productivity (productive technologies) but because one has more capital

Capital (economics)

In economics, capital, capital goods, or real capital refers to already-produced durable goods used in production of goods or services. The capital goods are not significantly consumed, though they may depreciate in the production process...

 to use, labor productivity will be higher.

Output per worker corresponds to the "average product of labour" and can be contrasted with the marginal product

Marginal product

In economics and in particular neoclassical economics, the marginal product or marginal physical product of an input is the extra output that can be produced by using one more unit of the input , assuming that the quantities of no other inputs to production...

 of labor, which refers to the increase in output that results from a corresponding (marginal) increase in labor input.

Measurement issues

Worker productivity can be measured in physical terms or in price terms.

Whilst the output produced is generally measurable in the private sector, it may be difficult to measure in the public sector or in NGOs. The input may be more difficult to measure in an unbiased way as soon as we move away from the idea of homogeneous labour ("per worker" or "per standard labour hour"):

• the intensity of labour-effort, and the quality of labour effort generally.
• the creative activity involved in producing technical innovations.
• the relative efficiency gains resulting from different systems of management, organization, co-ordination or engineering.
• the productive effects of some forms of labour on other forms of labour.

These aspects of productivity refer to the qualitative, rather than quantitative, dimensions of labour input. If you think that one firm/country is using labour much more intensely, you might not want to say this is due to greater labour productivity, since the output per labour-effort may be the same. This insight becomes particularly important when a large part of what is produced in an economy consists of services. Management may be very preoccupied with the productivity of employees, but the productivity gains of management itself might be very difficult to prove. Modern management literature emphasizes the important effect of the overall work culture or organizational culture that an enterprise has. But again the specific effects of any particular culture on productivity may be unprovable.

In macroeconomic terms, controlling for hours worked (i.e. expressing labour productivity as per worker-hour) should result in readily comparable productivity statistics, but this is often not done since the reliability of data on working hours is often poor. For example, the US and UK have much longer working hours than Continental Europe--this will inflate the figures on productivity in these countries if it is not accounted for. When comparing labour productivity statistics across countries, the problem of exchange rates must be considered because differences in how output is accounted for in different countries will change labour productivity statistics, quite apart from the obvious issues surrounding converting different currency units to a standard base.

The validity of international comparisons of labour productivity can be limited by a number of measurement issues. The comparability of output measures can be negatively affected by the use of different valuations, which define the inclusion of taxes, margins, and costs, or different deflation indexes, which turn current output into constant output. Labor input can be biased by different methods used to estimate average hours or different methodologies used to estimate employed persons. In addition, for level comparisons of labor productivity, output needs to be converted into a common currency. The preferred conversion factors are PPPs, but their accuracy can be negatively influenced by the limited representativeness of the goods and services compared and different aggregation methods. To facilitate international comparisons of labor productivity, a number of organizations, such as the OECD, the Groningen Growth Centre, International Labor Comparisons Program

Division of international labor comparisons

The International Labor Comparisons Program of the U.S. Bureau of Labor Statistics adjusts economic statistics to a common conceptual framework in order to make data comparable across countries...

, and The Conference Board, prepare productivity specifically to enhance the data’s international comparability.

Factors affecting labour productivity

In a survey of manufacturing growth and performance in Britain, it was found that:

“The factors affecting labour productivity or the performance of individual work roles are of broadly the same type as those that affect the performance of manufacturing firms as a whole. They include: (1) physical-organic, location, and technological factors; (2) cultural belief-value and individual attitudinal, motivational and behavioural factors; (3) international influences – e.g. levels of innovativeness and efficiency on the part of the owners and managers of inward investing foreign companies; (4) managerial-organizational and wider economic and political-legal environments; (5) levels of flexibility in internal labour markets and the organization of work activities – e.g. the presence or absence of traditional craft demarcation lines and barriers to occupational entry; and (6) individual rewards and payment systems, and the effectiveness of personnel managers and others in recruiting, training, communicating with, and performance-motivating employees on the basis of pay and other incentives.

The emergence of computers has been noted as a significant factor in increasing labor productivity in the late 1990s, by some, and as an insignificant factor by others, such as R.J. Gordon. Although computers have existed for most of the 20th century, some economic researchers have noted a lag in productivity growth caused by computers that didn't come until the late 1990s.”http://books.google.co.uk/books?id=z_xxhBtL8uAC&dq=isbn:0906321301