Accounting for Growth and the Productivity Slowdown

Productivity is about the quantity of output that is produced per unit of input and improvements in productivity relate to the production of more output with smaller input quantities. More often than not (as, for example, in the previous chapter) productivity is interpreted to mean ‘labour productivity’, that is to say it refers to output per unit of labour employed where this unit may be defined either as an employee or as an hour worked by an employee. In the previous chapter it was argued that growth in (labour) productivity is a major instrument (and, except in the short-term, the only instrument) for securing improvements in the real wage. This is one important reason why discussions of productivity are usually couched in terms of the efficiency with which labour is used. But there are other reasons as well for this emphasis on labour productivity: unit labour costs are a major component of the cost of producing value added with labour productivity constituting a major determinant of labour costs; moreover, wage negotiations between unions and employers usually contain, as an important subplot, negotiations about improvements in the productivity of the labour force. These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.