9V6RJ3rpFgRWRKz9atzwHWSEAzE Useful Articles Hard To Ignore: Generating Productivity

Wednesday, December 26, 2012

Generating Productivity

Productivity is basically defined as the measure of “the output from a production process per unit of input”. In labor, for example, it is typically a measure of “output per labor-hour.”

One area of great concern to industrialists and capitalists is related to labor productivity and the impact of the many factors around it – workplace practices, the advent of computers, capital infusion, education and training, and many others.

The main reason is the fact that while the impact of human capital investments on the workers’ wages had been studied extensively, there had been little information on the direct effect of human capital on productivity.

Labor productivity

To date, however, there had been new studies conducted and published. These studies examined the link between labor productivity and a variety of workplace practices, capital and computers, both in the manufacturing and non-manufacturing sectors.

In the conducted studies, the other issues factored in included the size and age of the business, material inputs, capital stock, workers’ experience, and capacity utilization.  


The studies were done to check the factors that determine labor productivity for a given period, the size of capital stocks needed for material use, the equipments, and the workplace practices. They also included computer use, human capital investments, high performance work systems, profit sharing, and recruitment practices.

One standout data, however, showed that increasing the educational level of employees by at least a year increases productivity as well. (8.5% in manufacturing and 13% in the non-manufacturing sector)

Training and decision-making

It demonstrated that formal training (done offsite, meaning from schools etc.) increased productivity in manufacturing. Computer savvy also enhanced productivity, especially in the non-manufacturing sector (sales, services, etc).

Other findings include that unionization or employee participation in decision-making also raised productivity. Also, it was found out that TQM (total quality management) system did not have much significant effects on productivity.

Rather, it was raising the proportion of workers in making decisions in the work place (regular meetings, etc.) that showed a positive impact on labor productivity.


In manufacturing plants with profit-sharing schemes for non-managerial workers, there was a 7% higher labor productivity shown compared with their competitors in the same field. Those with R & D (research and development) had an average 6% increase.

In effect, the studies showed that profit-sharing extended to non-managerial employees had increased productivity more than what the profit-sharing scheme with managerial workers did. Benchmarking also raised labor productivity by 6%.


To date, computers have also played a significant role in productivity increase (12% output) compared in the 80’s when equipment investments accounted for 7% output growth.

Investments in computers and other IT equipments were about 1/3 of total investments in the 90s.


All in all, investments in education and training generate higher productivity. Moreover, it promoted higher wage growth. Studies had shown that raising the workers’ educational level resulted in around 8 to 13% higher labor productivity

It had been found that investments in computer training (especially in the non-manufacturing group) resulted in higher productivity (and wages) of employees. Workers who use computers are paid 15% more than their counterparts who don’t.

However, the remaining challenge is to enable more workers equipped with skills to allow them access to better jobs. In such a scenario, they can enjoy a higher standard of living as well as contribute to higher productivity growth.

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