Increasing productivity is a rare win-win, improving the standard of living from a governmental, commercial and consumer perspective.
* Productivity is essentially the efficiency in which a company or economy can transform resources into goods, potentially creating more from less.
* Productivity can effectively raise living standards through decreasing the required monetary investment in everyday necessities (and luxuries), making consumers wealthier and business more profitable and in turn enabling higher government tax revenues.
* Economists looking to measure this productivity within a given system generally leverage production functions to determine how ...view middle of the document...
Increased gross domestic product (GDP) and overalleconomic outputs will drive economic growth, improving the economy and the participants within the economy. As a result, economies will benefit from a deeper pool of tax revenue to draw on in generating necessary social services such ashealth care, education, welfare, public transportation and funding for critical research. The benefits of increasing productivity are extremely far-reaching, benefiting participants within the system alongside the system itself.
To expand upon this, there are three useful perspectives in which to frame the value in improving productivity within a system from an economic standpoint:
* Consumers/Workers: At the most micro level we have improvements in the standard of living for everyday consumers and workers as a result of increased productivity. The more efficiency captured within a system, the lower the required inputs (labor, land and capital) will be required to generate goods. This can potentially reduce price points and minimize the necessary working hours for the participants within an economy while retaining high levels ofconsumption.
* Businesses: Businesses that can derive higher productivity from a system also benefit from creating more outputs with the same or fewer inputs. Simply put, higher efficiency equates to better margins through lower costs. This allows for better compensation for employees, more working capital and an improved competitive capacity.
* Governments:Higher economic growth will also generate larger tax payments for governments. This allows governments to invest more towardsinfrastructure and social services (as noted above).
1. What is productivity?
Productivity is a measure of the rate at which outputs of goods and services are
produced per unit of input (labour, capital, raw materials, etc). It is calculated as the
ratio of the amount of outputs produced to some measure of the amount of inputs
Productivity measures are used at the level of firms, industries and entire economies.
Depending on the context and the selection of input and output measures,
productivity calculations can have different interpretations.
Improving productivity can have connotations of economising on the use of inputs —
for example, adopting efficient production processes that minimise waste. Equally,
improving productivity can have connotations of yielding more output — for example,
using resources in activities or with technologies that generate more output.
Conceptually, productivity is a ‘supply-side’ measure, capturing technical production
relationships between inputs and outputs. But, implicitly, it is also about the
production of goods and services that are desired, valued and in demand.
Productivity growth is important because it contributes to growth in output, income
and living standard
Productivity is a measure of the efficiency of production, that is, of production's capability to create...