productivity

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productivity

In economics, a measure of productive efficiency calculated as the ratio of what is produced to what is required to produce it. Any of the traditional factors of production—land, labour, or capital—can be used as the denominator of the ratio, though productivity calculations are actually seldom made for land or capital since their capacity is difficult to measure. Labour is in most cases easily quantified—for example, by counting workers engaged on a particular product. In industrialized nations, the effects of increasing productivity are most apparent in the use of labour. Productivity can be seen not only as a measure of efficiency but also as an indicator of economic development. Productivity increases as a primitive extractive economy develops into a technologically sophisticated one. The pattern of increase typically exhibits long-term stability interrupted by sudden leaps that represent major technological advances. Productivity in Europe and the U.S. made great strides following the development of such technologies as steam power, the railroad, and the gasoline motor. Later in the 20th century, advances in productivity stemmed from a number of innovations, including assembly lines and automation, computer-integrated manufacturing, database management systems, just-in-time manufacturing, and just-in-time inventory management. Increases in productivity have tended to lead to long-term increases in real wages.

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