Worker Productivity: Definition & Statistics

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  • 0:00 What Is Worker Productivity?
  • 1:05 What Factors Impact…
  • 3:06 Why Do We Care About…
  • 3:47 Statistics
  • 4:45 Lesson Summary
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Lesson Transcript
Instructor: Carol Woods

Carol has taught college Finance, Accounting, Management and Business courses and has a MBA in Finance.

What is worker productivity, and why do we care about it? Read on to learn what worker productivity is, how to calculate it, and why it changes, then test your knowledge with a quiz.

What Is Worker Productivity?

Worker productivity refers to the amount of output produced per work hour. In other words, the calculation is:

Productivity = output / work hours

Output is generally measured in dollars, though, within a company, it might also be measured in terms of units of a specific item produced divided by the hours required to produce those specific units. So, if you made 10 quilts and sold them for $200 each, and it took you 5 hours to make each quilt, this is how you would calculate your productivity:

Output in dollars = 10 quilts x $200 each = $2,000

Work hours = 5 hours x 10 quilts = 50 hours

Productivity = $2,000 / 50 hours = $40 per hour

What Factors Impact Productivity?

Productivity measures total output over work hours, but hours are not the only input into producing the measured goods and services. Capital, such as new production equipment, improvements in technology, costs of materials, and selling price of items produced all impact the output that can be produced per work hour.

For example, we made 10 quilts in 50 hours and sold them for $200 each. If we purchased a new sewing machine and reduced our time to produce a quilt to 4 hours each, our new productivity level would be:

Output in dollars = 10 quilts x $200 each = $2,000

Work hours = 4 hours x 10 quilts = 40 hours

Productivity = $2,000 / 40 hours = $50 per hour

Our productivity increased by $10 per hour, or 20%, through the purchase of the new machine. Similarly, if we did not purchase the machine but increased our selling price to $225 per quilt, our new productivity level would be:

Output in dollars = 10 quilts x $225 each = $2,250

Work hours = 5 hours x 10 quilts = 50 hours

Productivity = $2,250 / 50 hours = $45 per hour

Our productivity increased by $5 per hour, or 10%, through an increase in our selling price. In both cases, we were able to increase our output per work hour, which is measured by quantity times selling price, so we generated more income per hour of work!

Why Do We Care About Productivity?

Increasing productivity means that we generate a higher output per hour of work. This gives us the opportunity to either produce more and generate more income for the given work hours or work less and hold income steady while increasing discretionary time. These equate to personal wealth; more income for the same hours or the same income for fewer hours.

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