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[edit] Introduction

Productivity is an economic indicator giving information about an organisation’s efficiency. It is a ratio of goods and services produced to the factors of production used to produce them.

[edit] Facts

Productivity factors

When determining productivity, a distinction is made between various factors of production. Essentially, these are:

  • labour productivity, i.e. the ratio of output to hours worked,
  • machine productivity, the ratio of output to machine-hours worked,
  • material productivity, the ratio of output to materials used,
  • capital productivity, the ratio of output to capital deployed.

No direct conclusions as to causality can be derived from productivity values for the individual factors. Thus, for example, an increase in labour productivity does not automatically mean that a company’s employees are working more or “harder”. The actual cause may be that more machines are being used per employee. This would reduce machine productivity, but mean that the average employee would produce more relative to his or her working hours.

Productivity gains

When output per unit of input is increased, there is said to have been a productivity gain. Productivity gains can have many causes. Factors such as more efficient processes, improved organisation structures, better employee qualifications, a more favourable statutory environment, increased use of factors of production and technical progress can all contribute to gains in productivity.

Productivity gains interact with wages, employment and unemployment in several ways. Trades unions use productivity gains as benchmarks during salary negotiations; employees want to share in the benefits of increased efficiency. Productivity gains also have repercussions for employment. If new technologies allow fewer employees to maintain or increase output, for example, this may result in less demand for some qualifications and more for others. Thus productivity gains can produce constant structural change resulting in greater efficiency and new, better and more varied products, but also in changing demands for employees.

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