Loading the player...

What is 'Productivity'

Productivity is an economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in revenues and other gross domestic product (GDP) components such as business inventories. Productivity measures may be examined collectively (across the whole economy) or viewed industry by industry to examine trends in labor growth, wage levels and technological improvement.

BREAKING DOWN 'Productivity'

Productivity gains are vital to the economy, as they mean that more is being accomplished with less. Capital and labor are both scarce resources, so maximizing their impact is a core concern of modern business. Productivity enhancements come from technology advances, such as computers and the internet, supply chain and logistics improvements, and increased skill levels within the workforce.

Productivity and GDP

Many economists measure and track productivity as a clue for predicting future levels of GDP growth. The productivity measure commonly reported through the media is based on the ratio of GDP to total hours worked in the economy during a measuring period. This productivity measure is produced by the Bureau of Labor Statistics four times per year.

How to Improve Company Productivity

Productivity can be improved by utilizing technology that allows more to be done in less time. For example, a stockbroking company may introduce an algorithm for its back office that eliminates a key task that was previously performed manually. Empowering employees can increase productivity. Employees who have the resources and flexibility to do their jobs more efficiently are likely to boost productivity; this frees up management's time to focus on more critical business functions.

Unfiltered internet access can be a hindrance for productivity. For example, employees may spend a large proportion of their time on social media or e-commerce sites such as Facebook, Instagram or eBay instead of performing work related tasks. Using modern communication tools such as an internal instant messenger is likely to enhance productivity as it promotes collaboration between employees.

How to Improve Individual Productivity

Monitor how much time you spend on tasks, and prioritize important work. Productivity can be reduced if you allocate time inefficiently. Use programs such as Rescue Time to increase productivity by tracking the time you spend on specific applications and websites.

Although it may sound counterintuitive, taking regular breaks has been shown to improve productivity; taking a five-minute break every 90 minutes often refocuses concentration. Increase your productivity by starting your workday on your daily commute. For example, a commodities trader may look at how the markets performed in Asia overnight, providing ideas to discuss in the morning meeting.

Ensure that your office space is inviting. Productivity can be increased up to 15% by an office that is aesthetically pleasing. Desktop wallpaper and photos of family, friends and favorite places creates positive feelings that can lead to increased productivity.

RELATED TERMS
  1. Labor Productivity

    Labor productivity measures the output of a country's economy, ...
  2. Gross Domestic Product - GDP

    GDP is the monetary value of all the finished goods and services ...
  3. Production Efficiency

    Production efficiency is a level at which the economy can no ...
  4. Real Gross Domestic Product (GDP)

    Real gross domestic product is an inflation-adjusted measure ...
  5. Economics

    Economics is a social science concerned with the production, ...
  6. Efficiency

    A level of performance that describes a process that uses the ...
Related Articles
  1. Insights

    One Reason Jobs Shrink: Superstar Companies

    Are superstar companies that dominate their industries but employ relatively few workers to blame for labor’s falling share of GDP?
  2. Insights

    Why GDP Is Not an Accurate Measure of the Economy

    Is gross domestic product (GDP) an accurate measure of the strength or weakness of the U.S. economy?
  3. Insights

    Economic Indicators That Affect The U.S. Stock Market

    Macroeconomic factors like GDP, Inflation, and Retail Sales affect the value of your portfolio. Understanding these economic indicators is vital for every investor in the marketplace.
  4. Financial Advisor

    What's Behind the Decline in Productivity Numbers? 

    There are several theories and hypotheses about low productivity numbers in the American economy. This article examines some of them.
  5. Insights

    The Economics of Labor Mobility

    Loosening labor restrictions, which allows for geographic and occupational mobility, has both good and bad effects on a country and its workers.
  6. Investing

    How Globalization Affects Developed Countries

    The increase in communications technology has companies competing in a global market.
  7. Investing

    Something Gross in GDP

    GDP is used to gauge the strength of the economy, but what is it actually measuring?
  8. Investing

    3 Emerging Markets With Bright Prospects

    Learn about emerging and developed Asian markets, their economic machines, and which key factors contribute to real and per capita GDP growth.
RELATED FAQS
  1. How is productivity calculated?

    Learn about productivity, what it measures and how to compute a company's productivity level by measuring its outputs relative ... Read Answer >>
  2. What Are the Best Measurements of Economic Growth?

    Learn how economists and statisticians track economic growth and why GDP might not be the best measurement of real economic ... Read Answer >>
  3. Why is productivity an important concept in economics?

    See why the concept of productivity is so crucial to understanding economic growth, and why a standard of living directly ... Read Answer >>
  4. How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a ... Read Answer >>
  5. What is the correlation between money supply and GDP?

    Read about the two-way correlation between the total amount of money circulating in the economy and gross domestic product, ... Read Answer >>
  6. What inputs are considered to be factors of production?

    Learn what the four categories of factors of production are and how different schools of economic thought view them. Read Answer >>
Hot Definitions
  1. Ethereum

    Ethereum is a decentralized software platform that enables SmartContracts and Distributed Applications (ĐApps) to be built ...
  2. Cryptocurrency

    A digital or virtual currency that uses cryptography for security. A cryptocurrency is difficult to counterfeit because of ...
  3. Financial Industry Regulatory Authority - FINRA

    A regulatory body created after the merger of the National Association of Securities Dealers and the New York Stock Exchange's ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs are often issued by companies seeking the capital to expand ...
  5. Cost of Goods Sold - COGS

    Cost of goods sold (COGS) is the direct costs attributable to the production of the goods sold in a company.
  6. Profit and Loss Statement (P&L)

    A financial statement that summarizes the revenues, costs and expenses incurred during a specified period of time, usually ...
Trading Center