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Labor productivity is the value of goods produced in an hour of work. It can be calculated for a nation, industry, firm, team or individual using the productivity formula. The following are illustrative examples of labor productivity calculations.
NationsLabor productivity can be calculated for a nation using GDP and total hours worked. labor productivity = GDP / total hours workedFor example, a nation with GDP per worker of $100,000 and average hours worked of 1550:labor productivity = $100,000 / 1550 = $64.52 / hourGrowth RateNational labour productivity is often represented as a year-over-year growth rate using the formula:labour productivity growth rate = ((current year productivity / previous year productivity) -1) × 100For example, a nation with productivity of $64.52 this year and $63.70 last year:labour productivity growth rate = ((64.54 / 63.70) -1) × 100 = 1.32%It is common to discuss the productivity of nations in terms of the growth rate. For example, when people say that productivity is falling, they often mean that the growth rate of productivity is falling.
Company ProductivityIt is possible to calculate labor productivity for a company or a business process such as a production line using the productivity formula:labor productivity = value of output / total hours workedIn the context of a firm, value of output is usually gross revenue. For example, a firm with revenue of $9 million dollars and 5 employees who work a total of 9750 hours:labor productivity = $9,000,000 / 9750 = $923 / hourLabor productivity doesn't consider business costs such as inventory, equipment, materials, parts and marketing that are required to generate revenue. As such, labour productivity should not be confused with an hourly wage or profit.|
| Type | | | Definition | The value of goods produced in an hour of work. | | Also Known As | Labour ProductivityProductivity Rate | | Related Concepts | |
Productivity
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