Workforce productivity is the amount of goods and services that a worker produces in a given amount of time. It is one of several types of productivity that economists measure. Workforce productivity can be measured for a firm, a process, an industry, or a country. It is often referred to as labor productivity because it was originally studied only with respect to the work of laborers as opposed to managers or professionals.
The OECD defines it as "the ratio of a volume measure of output to a volume measure of input".[1] Volume measures of output are normally gross domestic product (GDP) or gross value added (GVA), expressed at constant prices i.e. adjusted for inflation. The three most commonly used measures of input are:
- hours worked;
- workforce jobs; and
- number of people in employment.
Measurement
Workforce productivity can be measured in 2 ways, in physical terms or in price terms.
- 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 labor on other forms of labor.
These aspects of productivity refer to the qualitative dimensions of labor input. If an organization is using labor much more intensely, one can assume it's due to greater labor productivity, since the output per labor-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 is very difficult to prove. While labor productivity growth has been seen as a useful barometer of the U.S. economy’s performance, recent research has examined why U.S. labor productivity rose during the recent downturn of 2008–2009, when U.S. gross domestic product plummeted.
The validity of international comparisons of labor 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 Purchasing Power Parities, 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, and The Conference Board, prepare productivity data adjusted specifically to enhance the data’s international comparability.
Factors affecting labor productivity
In a survey of manufacturing growth and performance in Britain, it was found that:
“The factors affecting labor 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 behavioral 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 labor 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.”
