Labor Productivity

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DEFINITION of 'Labor Productivity'

A measurement of economic growth of a country. Labor productivity measures the amount of goods and services produced by one hour of labor. More specifically, labor productivity measures the amount of real GDP produced by an hour of labor. Growing labor productivity depends on three main factors: investment and saving in physical capital, new technology and human capital.

INVESTOPEDIA EXPLAINS 'Labor Productivity'

For example, suppose the real GDP of an economy is $10 trillion and the aggregate hours of labor in the country was 300 billion. The labor productivity would be $10 trillion divided by 300 billion, equaling about $33 per labor hour. Growth in this labor productivity number can usually be interpreted as improvements or rising standards of living in the country.

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RELATED FAQS
  1. How is productivity calculated?

    Productivity measures the efficiency of a company's production process. It is calculated by dividing the outputs produced ... Read Full Answer >>
  2. Why are the factors of production important to economic growth?

    Real economic growth only comes from increasing quality and quantity of the factors of production, which consist of four ... Read Full Answer >>
  3. Why is productivity an important concept in economics?

    The level of productivity is the most fundamental and crucial determinant of a standard of living. Increased productivity ... Read Full Answer >>
  4. What are the economic impacts of specialization?

    Specialization, along with the complementary concept of the division of labor, occurs when the innate inequalities of human ... Read Full Answer >>
  5. What determines labor productivity?

    Labor productivity is the rate of output per worker within a specified unit of time. Economists and statisticians track labor ... Read Full Answer >>
  6. How much should my profit margins be?

    For many people, identifying and targeting a set profit margin is an important part of their business's pricing strategy. ... Read Full Answer >>
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