Trends In Productivity

Productivity, defined as a measure of the amount of output per hour of work, is shown to be typically pro-cyclical. This means that productivity increases during economic upswings and slows down (or even declines) when the economy is in a downturn.

Several causes have been forwarded to sustain this. One declares that labor and capital inputs are worked harder during boom times than in busts. Another observation pronounces that the reallocation of resources to more productive activities is faster when the economy grows rapidly than when it slows down.

Pro-cyclical exceptions

For 2009, productivity growth was expected to slow down further in many countries. However, there appeared to be some exceptions to the pro-cyclicality of labor productivity.

The experiences of the United States and Europe are two examples reflecting this economic wrinkle. Compared side by side, striking differences are evident between these two regions in terms of the productivity growth rates with which they entered the current recession.

For the long period of 2000-2008, labor productivity in the United States increased at 2% against 1.5% in the European Union. (The 1.1% figure is even much smaller in the original EU-15 member states that exclude the new member states from Central and Eastern Europe.)

These differences reflect a more efficient use of capital, labor, and other sources of growth in the United States. The most recent productivity advances of the U.S. have been realized, however, through rapid layoffs. This further suggests that the productivity of the remaining workers and firms is actually strengthening.

Traditional productivity growth rates

During the run-up of 2008, the Euro Area showed a surprisingly weak productivity growth (below 1%). This was attributed to the large increases in employment coming from a relatively large labor reserve pool.

In the same quarter, output and productivity growth rates in the Euro Area turned negative following the traditional pattern that employment growth does not adjust as quickly to a deteriorating economy in Europe as it does in the U.S.

Presently, productivity growth rates in advanced economies are falling below historical structural productivity trends. These represent the rate where productivity can grow.

To get back to the structural growth trend, an increased productivity through investment in new capital and innovation is needed - and not just through cost-cutting of the current resource base.

This would comprise investments in technological change and innovation, skill and performance level of the labor force, and all the organizational intangibles (management and workplace practices, organizational structure, ICT applications and human resource strategies).

Given the current constrained economic climate, all these are big challenges. Added to this is the expectation that high productivity growth rates also imply greater efficiency of resources once the economic environment improves.

Productivity growth will also translate into high levels of output per hour. These higher productivity levels will also reflect the presence of a strong resource base in terms of human and physical capital per worker.

When maintained during the downturn, they will provide the firms with the means to more easily innovate themselves out of the recession resulting in a better resurgent productivity growth.

Other Productivity Management and Your Life Articles

Generating Productivity
Self-Assessment As Key To Productivity
Defining Productivity
Managing Productivity Measurements
Cutbacks Slice Into Productivity
Increasing Productivity
Some Strategies To Perk Up Productivity
Measuring Productivity
The Best Guide to Bolstering Productivity and Effectiveness
Labor Vis--Vis Multi-Factor Productivity
How to Increase Your Productivity at the Office
Trends In Productivity
Productivity Measurement A Short History
Insights on Increasing Productivity: Effectively Set Your Goals
Paving The Way To Productivity
Economics And Productivity
How Productivity Aids Success In Life
The Importance Of Labor Productivity Growth
Getting Started In Increasing Productivity
Productivity Growth Factors
Productivity, Efficiency And Effectiveness
Motivation And Productivity
Increased Productivity Via Unified Communications
Productivity at Home

Productivity Management and Your Emotions Videos

Site Index Page * Home Page * Privacy Policy * Conditions * Disclaimer * Contact

Disclosure: Advertisements are placed on this website to offset the cost of maintenance and to keep this site free for everyone to use. Owners of this website will receive compensation for products and services purchased through featured advertisements.
All claims of actual user results should be considered as a-typical.

© 2011 Copyrighted by OkiDoki - All Rights Worldwide Reserved!
Site and articles redirected and transformed by Hans Peter M. Mul