Productivity is an economic concept which measures the efficiency of production. This is represented by a simple ratio of the resources that are required to produce a certain output. The ratio could be calculated for labour (human resources), capital or land, but the last two have little significance.

Labour efficiency does make sense because it indicates the "efficiency" of the human resources, said differently: how many workers are used to manufacture this product or production.

Productivity could be seen as a level, and will then fall under the infrastructural part of the economy. In such a case, less developed countries will have a lower productivity and in their development the productivity will grow. This growth is achieved by -- most of all -- technological developments. The introduction of new technology will enable a higher production with less (human) resources.

Technological development are visible for any of us; we see more sophisticated information systems are work, we see automated production, but also "simple" inventions like the mobile phone that will save you a trip (less transport) to communicate…

On a micro-economic level, productivity is an expression of the efficiency of a single process or as a way to communicate how productive someone’s working week has been. How much did you produce this week…

A recent statistical overview presented by Eurostat, informed us about the differences in this working week between the various member states of the European Union.

© 2006 Hans Bool

Hans Bool is the founder of Astor White a traditional management consulting company that offers online management tools. Have a look at some of our free management tools

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