Productivity is output per unit of input, usually output per worker. It tells you how well a firm uses what it has, which is different from how much it makes.
This lesson is part of production and costs. It uses the average figures from total, average and marginal quantities.
How do I calculate productivity?
Labour productivity equals total output divided by the number of workers. Use hours worked instead if the question supplies hours.
A fictional chair workshop makes 360 chairs a month with 12 workers. Productivity is 360 ÷ 12 = 30 chairs per worker.
After a training course, the same 12 workers make 420 chairs. Productivity is 420 ÷ 12 = 35 chairs per worker, a rise of 5 chairs per worker.
What raises productivity, and how?
A full-mark explanation names the factor and the mechanism. The table sorts common factors so you can build chains quickly.
| Factor group | Example | Mechanism |
|---|---|---|
| Labour | Skills training | Workers finish tasks faster with fewer errors |
| Labour | Better health | Fewer days lost, steadier pace |
| Capital | A faster sanding machine | Each worker processes more chairs per hour |
| Organisation | Dividing tasks into stages | Less time lost moving between jobs |
| Materials | Better-cut timber | Less waste and less rework |
The chain is: factor, then mechanism, then more output per worker. Skip the middle and the answer becomes a list.
Worked example: turning figures into an explanation
Using the workshop, productivity rose from 30 to 35 chairs per worker. A weak answer says: “Productivity rose because of training.”
A stronger answer says: “Productivity rose from 30 to 35 chairs per worker because the training gave workers better skills. They finished each chair faster and made fewer errors, so the same 12 workers produced 420 chairs instead of 360.”
The stronger answer includes the figures, the factor, the mechanism and the effect. It also keeps the number of workers constant, which is what makes the rise a real productivity gain.
The mistake that costs marks
The common slip is to equate output with productivity. A student writes “output rose from 360 to 440 chairs, so productivity rose”, but the workshop hired four more workers.
Check: 440 ÷ 16 = 27.5 chairs per worker, which is lower than 30. Output rose and productivity fell. Always divide before you claim.
Check yourself
A fictional bakery makes 600 loaves a week with 10 workers. After buying a new mixer it makes 780 loaves with 12 workers. Did productivity rise? Give one reason the mixer could matter.
Answer
Before: 600 ÷ 10 = 60 loaves per worker. After: 780 ÷ 12 = 65 loaves per worker.
Productivity rose by 5 loaves per worker. Note that output rose by 180 loaves, but the productivity gain is smaller because two workers were added.
The mixer could matter because it mixes dough faster than by hand, so each worker spends less time on mixing and more on baking and packing, which raises output per worker.
What to study next
Read how output growth need not mean higher productivity to drill the mistake above. To shape written answers, see writing cause, mechanism and effect explanations.
If you want a teacher to test your explanations with you, see online one-to-one Economics tuition.