In
economics, productivity is the relative relationship between inputs (factors of
production) and outputs (goods and services). The more productive a company is, the more it can produce with the same level of inputs. Productivity can be applied to describe teams, countries, businesses or whatever economic unit you wish to describe.
Productivity can measure not just quantity of outputs, but also quality or other value-adding traits. All the factors of production can be measured for productivity. For example, labour productivity describes how much output a worker can generate in a given time frame, capital productivity likewise measures the relative performance of machinery engaged, and yield measures how much food can be grown in a specific area of cultivated land. Multifactor productivity weighs both labor and capital productivity.
Smart management and technology can improve productivity. Adam Smith first demonstrated how the production line could make factories more productive, by arranging unskilled workers into task-orientated roles that form discrete parts in a production process. Automation minimises the number of tasks that need to be carried out. Machines, being faster, hardier and more accurate, tend to be more productive than humans for most manual tasks, and recent innovations in information technology can extend productivity to information processing. Humans can be made to work more productively through training, sympathetic management and improved environmental conditions at work.
The effects of improved productivity are reduced relative production costs, which generates a dividend - which can translate into cheaper goods, better paid workers and/or a more profitable company to become more profitable. More widely, increased productivity generally improves economic wellbeing in a country, and is the driver to economic growth.