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This page contains a collection of the answers to the most common questions people ask about productivity.
- What is Productivity?
- What is Labour Productivity and how is it measured?
- What is Productivity Measurement?
- Why should productivity be measured?
- Who benefits from productivity?
- How important is productivity improvement
to achieving sustained economic and social development?
- How Do I Improve My Company’s Productivity?
- Why is Productivity Growth important?
Productivity is the efficiency and effectiveness with which an individual, firm, industry or country converts factor inputs such as labour and capital, into outputs in the form of goods and services. Producing more goods and/or services with the same inputs or producing the same quantity of goods and/or services with less inputs are examples of improvement in productivity.
Labour productivity measures the amount of goods and/or services produced by each worker. It can be measured both in terms of physical input (output per worker) or the intensity of the worker’s efforts (output per hour worked). Output per worker is more popularly used for international comparisons because employment data is easier to obtain and more reliable than hours worked data.
Productivity measurement refers to the use of tools and techniques by statisticians to measure and benchmark the productivity performance of an organisation (or individual, industry, country).
- Productivity is an important performance indicator that is frequently used in evaluating and monitoring how individuals, firms, industries and countries are progressing. It is a critical determinant of competitiveness, profitability, standard of living and employment.
- Enables an entity to quantify the contributions to output that is made by factors of production, such as labour, capital and technology.
- Allows for the measurement of changes in the efficiency of the production process and the factor(s) of production responsible
- Allows for an entity’s performance to be benchmarked in the local and international markets
- Assists an entity with strategic planning, financial planning, policy decision making and targeting resources in areas that will give the greatest return
Improved productivity result in gains for workers and their families, businesses, the government, and by extension, the entire country. Improvement in productivity will lead to an increase in the purchasing power of workers through higher wages. The increase in purchasing power will allow for an improvement in standard of living. Businesses will also benefit from increases in profit, consumer demand and market share. Higher demand for businesses’ goods and services will open opportunities for business expansion and hence employment and job creation. Government will receive more in taxes to spend on public goods thereby increasing the quality of life for all citizens.
Productivity improvement or technological progress is the only way to achieve sustained growth in output per worker and thus economic growth. Increases in capital will raise the productivity level of the labour force but only up to a certain point, due to diminishing marginal returns. However it is technological progress that will lead to sustained productivity improvement and thus economic growth and development
Growth in productivity through technological progress makes the employed labour force more efficient and results in increased output. For example, a 2% growth in productivity for the year means that each worker is 2% more efficient than last year. The more efficient a worker becomes the more output that worker, and by extension the country can produce.
Other Recommended Adjustments
The Jamaica Productivity Centre works closely with local and international organisations to address challenges that hinder productivity and profitability.
Omit – “We benchmark international best practices”
Our Services – eliminate “firm level”
- JPC Resources
- Productivity Tools
- External Resources
There are many things you can do to increase productivity. The following are some examples:
- To increase sales or sell higher value goods, you can innovate new products, improve the quality of existing products/services, ramp up marketing activities, etc.
- To reduce the cost of production, you can streamline work processes, review your supply chain practices, produce larger volumes to achieve economies of scale, etc.
- To get the best out of your employees, you can send them for training, improve management/organisation practices, redesign jobs or work arrangements, etc.
- To maximise your capital, you can increase/upgrade machinery, automate tasks which you repeat every day, improve the physical environment/space, adopt the use of technology, etc.
- The most productive firms in an economy will have lower cost of production and can charge a lower price for its goods and services.
- Lower prices for goods and services will allow productive firms to supply larger quantities due to increased local and overseas demand
- It follows that the most productive firms will command a greater market share and end up having higher revenues and profits
- Resulting in higher tax revenues for government which it can use to invest in productivity-enhancing public goods and services.
- It improves living standards as it allows for sustainable wage increases without eroding cost competitiveness
- Lower market prices translate into increased consumer purchasing power
- It allows goods and services to compete successfully within the global marketplace
- It makes goods and services affordable to the average person, thereby facilitating growth in consumer demand
- It facilitates job creation and employment growth