Introduction to Productivity
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This document discusses productivity, including its definition, measurement, and explanations for growth. It provides the following key points: 1. Productivity is defined as output per input, where output is value added and input includes costs of labor, capital, and bought goods and services. Productivity can be measured at the firm, sector, or economy level. 2. Productivity is commonly measured as labor productivity (value added per worker) or total factor productivity (amount output exceeds inputs). International comparisons examine levels in a common currency or growth rates in national currencies. 3. Recent productivity growth rates have been below long-term trends in many countries. Increased investment in capital equipment, skills, R&D, and
Introduction to Productivity
- 1. Smart manufacturing workshop. Introduction to productivity definition, measurement and explanation Christopher Moir WMG
- 2. Productivity: definition Output/input Output: value added; or turnover( £,$,€) Input: total cost of labour, total cost of capital, cost of bought in goods and services ( £,$,€) Applies to a firm, a sector, an economy
- 3. Productivity: measurement (1) Labour productivity; Average value added/worker. Average value added per worker hour.
- 4. Productivity: measurement (2) Total Factor Productivity (TFP) Amount by which the value of output exceeds the value of inputs.
- 5. Productivity measurement (3) International comparisons: Levels or growth rates. Levels in national currency converted into a common currency e.g US$ Growth rates in national currency alone
- 6. Relative labour productivity 2014. whole economy. (GDP/worker hour.)UK =100 United States 133 France 129 Germany 128 Italy 101 Japan 85 EU 27 100 The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
- 7. Growth in labour Productivity (Value added/worker hour). Whole economy 1999-2006 2007-2012 2014 2015 proj. UK 2.4 0.1 0.1 0.3 US 2.4 1.3 0.5 0.4 Germany 1.6 0.7 0.1 1.0 France 1.9 0.3 0.2 -0.1 Italy 0.5 -0.1 -0.6 0.2 Eurozone 1.5 0.6 0.2 0.5 Source: The Conference Board Total Economy Database™, May 2015, http://www.conference-board.org/data/economydatabase/
- 8. Growth in Total Factor Productivity whole economy 1999-2006 2007-2012 2013 2014 US 1.0 0.2 0.6 0.1 UK 0.7 -0.8 -0.4 -0.1 Germany 1.0 0.1 -0.5 -0.3 France 0.6 -0.5 -0.4 -0.6 Italy -0.3 -0.7 -0.4 -0.6 Source; Conference Board. http://www.conference- board.org/data/economydatabase/
- 9. Productivity Growth:Explanations Growth of output is a function of Increased investment in: • capital equipment. • Skills and management competence • Software, R and D , new knowledge
- 10. Contributions to economic growth UK Germany US 2006 2014 2006 2014 2006 2014 GDP growth 3.0 2.8 3.6 1.6 2.6 2.4 labour 0.4 1.9 1.1 1.0 1.1 1.1 skills 0.1 0.1 0.1 0.1 0.1 0.1 Cap invest IT 0.3 0.3 0.4 0.6 0.5 0.6 Cap invest non IT 0.7 0.6 0.2 0.2 0.8 0.6 TFP 1.4 -0.1 1.8 -0.3 0.2 0.1 https://www.conference-board.org/data/economydatabase/index.cfm?id=27762
- 12. Manufacturing productivity levels UK =100 Value added/worker hour Capital intensity(cap/worker hr.) Capital share in VA % UK 100 100 20 Germany 132 222 34 France 110 162 30 US 108 226 42 Source: http://www.euklems.net/ note. Latest data are for 2007
- 13. Growth in labour productivity: manufacturing. (Value added/worker hour) 1999-2006 2007-2012 2013 2014 UK 5.0 1.5 -1.0 2.1 US 6.3 2.3 0.7 1.4 Germany 4.1 1.0 -0.3 0.6 France 4.6 2.0 0.6 1.8 Italy 1.5 1.1 1.0 -1.5 Japan 3.8 3.3 3.2 1.9 Source: Conference Board
- 14. So what? Productivity growth matters Main source of increasing living standards. Wages for workers, profits for businesses. Recent growth rates well below long run trends.
- 15. Productivity of individual firms Aim; good profits, contented and efficient workforce, little shouting How? Superior product, avoid the competition, specific firm attribute not easily copied. Decision making and culture
- 16. Decision making Efficiency of knowledge acquisition, exploitation and sharing within the business. Speed and process of decision making Resources needed for successful implementation. Relationships with suppliers and customers
- 17. Culture Firm values and beliefs Inward or Outward looking Promotes learning or stifles it Harmonious in firm interaction or conflict removes barriers to knowledge sharing or creates them.
- 18. Two examples Toyota/ GM JV at Nummi plant Caterpillar investment in Laser welding
- 19. Concluding observations Increasing firm productivity is a big challenge It almost certainly requires investment in all its forms A lot can be learnt from others the trick as Dickens said was to look about you.