IshaanBilala
Banned
Productivity—the amount of output per unit of input—is a basic yardstick of an economy's health. When productivity is growing, living standards tend to rise. When productivity is stagnating, so, generally, is well-being.
Productivity can be defined in two basic ways. The most familiar, labor productivity, is simply output divided by the number of workers or, more often, by the number of hours worked. Output can be anything from tons of steel to airline miles flown, but more generally it is some very broad aggregate like gross domestic product. Measures of labor productivity, however, actually capture the contribution to output of other inputs than hours worked.
Total factor productivity, by contrast, captures the contribution to output of everything except labor and capital: innovation, managerial skill, organization.
Productivity can be defined in two basic ways. The most familiar, labor productivity, is simply output divided by the number of workers or, more often, by the number of hours worked. Output can be anything from tons of steel to airline miles flown, but more generally it is some very broad aggregate like gross domestic product. Measures of labor productivity, however, actually capture the contribution to output of other inputs than hours worked.
Total factor productivity, by contrast, captures the contribution to output of everything except labor and capital: innovation, managerial skill, organization.