Productivity

Productivity is a measure of the efficiency with which goods and services are produced. In economics, it is commonly defined as output per unit of input, such as labor or capital. At the macro level, productivity growth helps explain increases in living standards. At the micro level, productivity can describe the pace and quality of work by individuals, teams, or organizations.

Two common macro measures are labor productivity, real output per hour worked, and total factor productivity, the portion of output growth not explained by measured inputs. These metrics capture different aspects of how effectively inputs are turned into valuable goods and services.

Drivers of productivity include technological progress, human capital and skills, physical capital, organizational practices, process design, health and safety, and working conditions. External factors such as institutions, infrastructure, and market competition also influence productivity.

Improvements often arise from better planning, prioritization, streamlined workflows, automation, standardization, and training. They also depend on organizational culture and incentives. However, productivity gains can exhibit diminishing returns, and efforts focused narrowly on speed can increase errors or stress.

Critiques emphasize that productivity measures may neglect quality, creativity, and well-being, and can incentivize perverse behaviors if misused. Data limitations and differences across industries can complicate comparisons.

Historically the concept originated in manufacturing during the industrial era and has evolved to cover services and knowledge work. The rise of digital tools has reshaped how productivity is measured and managed, highlighting automation, remote work, and new collaboration practices.