Productivity

Intermediate

Productivity is a measure of how efficiently inputs, such as labour and capital, are turned into output, commonly measured as output per worker or output per hour worked.

Productivity shows how much an economy, industry or business produces with the resources it uses. Higher productivity means more output from the same effort, or the same output with less.

For example, if a factory with 50 workers produces 1,000 units a day, its output per worker is 20 units. If new equipment raises output to 1,100 units with the same staff, output per worker rises to 22 units, a 10% increase in labour productivity.

Productivity growth is the main long-term driver of rising living standards. When workers produce more per hour, businesses can afford to pay higher wages without raising prices, and the economy can grow without simply requiring more hours of work.

Productivity is improved by better technology and equipment, better education and skills, improved management and organisation, and more efficient markets. Slow productivity growth, which many developed economies have experienced in recent decades, is a major concern for economists because it limits how quickly incomes can rise.

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