Labour productivity

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, often referred to as labor productivity, is a measure for an organization or company, a process, an industry, or a country.

Workforce productivity is to be distinguished from employee productivity which is a measure employed at individual level based on the assumption that the overall productivity can be broken down to increasingly smaller units until, ultimately, to the individual employee, in order be used for example for the purpose of allocating a benefit or sanction based on individual performance (see also: Vitality curve).

The OECD defines it as "the ratio of a volume measure of output to a volume measure of input". 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:

Workforce productivity can be measured in 2 ways, in physical terms or in price terms.

These aspects of productivity refer to the qualitative dimensions of labour input. If an organization is using labour much more intensely, one can assume it's due to greater labour productivity, since the output per labour-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 labour 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.

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