“More than 80% of the variation in GDP per capita across countries is due to microeconomic variables. It is rooted in the sophistication of firms’ work practices and strategies, as well as the quality of the microeconomic business environment in which a country’s firms compete.” – Michael Porter

“Many countries can improve their prosperity if they can improve their productivity. There are unlimited human needs that can be met if productivity lowers the cost of products and productive labor absorbs better pay.” – Michael Porter

Productivity is considered a key source for economic growth and competitiveness and, as such, is basic statistical information for the evaluation of countries’ performance. There are different ways to measure productivity and the choice depends on the purpose and/or availability of data.

Productivity for REGENERING: Economic value created in a unit of labor time.

Productivity: output of a process per unit of input, in a specific time.

Labor Productivity = output per hour worked.

Total Factor Productivity = output per unit of combined inputs:

  • Capital
  • Labor
  • Energy
  • Materials
  • Business Services
  • Technical and organizational innovation

Note1: production can be accounted for in different ways: units produced, amount invoiced, etc.

Note2: it is important to differentiate between Hours Worked and Hours Paid.

What affects labor productivity?

Excluding variation in hours worked, output per labor hour can increase due to:

  • Technological advances
  • Improved worker skills
  • Improved management practices
  • Economies of scale in production
  • Increases in the amount of non-labor inputs used

How are Hours Worked calculated?

They include:

  • The hours worked, normal and overtime.
  • The duration, in the workplace, of downtime due to occasional absence from work.
  • The time corresponding to short rest periods at the workplace.

Exclude:

  • Hours paid but not worked such as vacation, holidays, or sick leave.
  • Meal breaks.