Labor Productivity

What is ‘Labor Productivity’

Labor productivity is a measure of economic growth within a country. Labor productivity measures the amount of goods and services produced by one hour of labor; specifically, labor productivity measures the amount of real gross domestic product (GDP) produced by an hour of labor. Growth in labor productivity depends on three main factors: investment and saving in physical capital, new technology, and human capital.

Explaining ‘Labor Productivity’

Labor productivity is defined as real economic output per labor hour. Growth in labor productivity is measured by the change in economic output per labor hour over a defined period of time.

The Importance of Measuring Labor Productivity

Labor productivity is directly linked to improved standards of living in the form of higher consumption. As an economy’s labor productivity grows, it produces more goods and services for the same amount of relative work. This increase in output makes it possible to consume more of the goods and services for an increasingly reasonable price.

Further Reading

  • The great recession and delayed economic recovery: A labor productivity puzzle? – [PDF]
  • Industrial Agglomeration and Difference of Regional Labor Productivity: Chinese Evidence with International Comparison [J] – [PDF]
  • The effects of real wages and labor productivity on foreign direct investment – [PDF]
  • Labor productivity of services sector in Malaysia: Analysis using input-output approach – [PDF]
  • On finance as a theory of TFP, cross‐industry productivity differences, and economic rents – [PDF]
  • The direct impact of climate change on regional labor productivity – [PDF]
  • Lack of access to external finance and SME labor productivity: does project quality matter? – [PDF]