Productivity

Productivity refers to the efficiency of production, normally calculated as units of output produced per unit of input. In theory, in similar production processes, the process that produces more output [Page 706]per unit input is classified as more productive, and the process that produces less output per unit input is regarded as less productive.

Most social scientific discussions of productivity do not focus on the utility of productivity as a concept. Instead, major debates occur around the operationalization of productivity, the validity of the calculations that follow from specific operationalizations of productivity, and what specific measures of productivity tell us about the overall health of the economy and its ability to produce higher standards of living. Closely tied to these debates about the operationalization of productivity are concerns about how potential productivity gains and losses are distributed to workers, managers, and investors and whether the division of the spoils of productivity occur in proportion to individual or group contributions. There is a prevailing view among many, but not all, policy analysts that productivity has risen substantially in the 1990s and 2000s but that the proceeds from those gains have been distributed mostly to investors and high-level managers. Hence, the study of productivity cannot be separated from the question of who benefits from gains in productivity and who suffers from losses in productivity.

One further complexity researchers address is how to measure productivity in industries and workplaces that do not produce tangible goods. Most discussions of productivity have focused on productivity in manufacturing and have not focused on productivity in services or government public-service activities. This has led to controversies about how productive private and government services are, which has serious implications for developed economies that are shifting their economic focus from manufacturing to services. For the purposes of this entry, the term productivity refers to the related processes of turning inputs into outputs and then distributing the proceeds to different stakeholders in the production process: investors, workers, and consumers.

Competing Definitions of Productivity

Productivity has traditionally been defined in a variety of ways, but here we will focus on three: (1) the production income method, (2) the productivity method, and (3) the growth accounting method. These definitions point to different ways of measuring productivity, none of which is perfect and all of which become less perfect as the factors affecting production increase.

Production income methods focus on changes in the price and volume of different inputs used to create specific outputs. Here, the measurement focuses on the value of labor, materials, energy, capital, and other factors needed to produce a specific volume of outputs that sell for specific prices. The process that maximizes the output volume and price per dollar (or other currency) unit of different inputs is viewed as most efficient. This is sometimes called a “surplus value” calculation, which is not to be confused with “surplus value” as Karl Marx viewed it.

Productivity is just as important to the Lockheed Martin C-130J production line in Marietta, Georgia (left), as it is for the Krispy Kreme doughnut outlet in Alexandria, Virginia (right). Productivity refers to the efficiency of production, normally calculated as units of output produced per unit of input. The production process that generates more output per unit of input is classified as more productive.

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