Productivity is a general term used to describe the efficiency of converting an input into a useful output in a production process. In other perspectives, it is a measure of production efficiency. Productivity is a very critical element for the effective investment of firms and nations on the factors of production. Land, labor, entrepreneurship, and capital are the four major factors of production whose utilization entirely depends on the productivity levels. Furthermore, various definitions of productivity vary based on its usefulness and the available data. Therefore, productivity defers in terms of its partiality and totality in the production process. From a practical point of view, partial productivity measures quantities such as resources, energy per unit production and the labor hours used by a worker. Because partial productivity fragments the production process into distinct sub-sections, it thus provides a means to measure how each input unit is put into use effectively. Labor efficiency is an example of partial productivity in microeconomics. Because labor productivity is diverse, it offers a dynamic platform of measuring competitiveness, economic growth and the living standards in a given nation. In general, labor productivity measures, the ratio of gross domestic product to the labor input applied. The usefulness of labor productivity justifies its implications for the economic growth of a nation.
On the other hand, total productivity measures all the inputs and outputs in a production process. However, in this measurement, it is prudent enough to include all the input variables used in a production process. Omitting of any input element limits the final accounting results. This criterion of measuring the production efficiency is normally used when there is a need to demystify the income formations in a production process. Therefore, total productivity provides firms with a subtle strategy of determining the gains associated with the utilization of resources. Even though partial productivity provides a means of measuring the efficiency of each production element, it is difficult to integrate the aggregated efficiencies. However, it is tedious to come up with a scheme that categorizes all the inputs used in a given production process. To understand the impact of total productivity, it is worth contextualizing some of the benefits associated with its application. For instance, stakeholders can use the total productivity data for future adjustments.
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It is also worth analyzing the relationship that productivity has on a country’s living standards. For instance, labor productivity measures the number of goods and services produced by a worker in a given stipulated period. With this postulation, it is very evident that productivity determines the living standards of a nation. Also, it is import to note that the living standards of a country are measured in different ways. Generally, elements such as poverty levels, inflation, and food availability are some of the indicators of living standards. Based on the definition of productivity, the availability of foodstuffs and other products depends on the rate of production. Therefore, low levels of productivity negatively implicate the wellbeing of individuals in a country.
Furthermore, an increase in the level of productions implies that workers are likely to have increased wages. In some countries, wages are calculated per unit hours. Therefore, if the productivity levels are raised, workers are more likely to have a better pay which serves to reduce the poverty levels. Also, the increased productivity levels boost a county’s exports which helps to reduce the inflation associated with lack of viable export returns. The excellence of a country’s productivity levels does not rely solely on the amounts of resources available but the efforts applied to realize better outputs. This concept can be visualized in the case of India and China who boast of vast physical resources but still experience low living standards. With this assertions, it is very clear that production entirely relies on workforce, materials, and machines. Before 1979, China struggled to put its vast resources into use due to lack of enough machinery to improve productivity. Also, because the country boasts of a huge population as compared to the USA, the demand for products and services is much higher than what is supplied. The ability of a country to effectively utilize the natural resources dictates how citizens can satisfy their wants and needs. Therefore, it is very clear that low productivity levels affect the living standards of citizens in a country. Low productivity levels also imply that a country will not be in a position to economically sustain its citizens. In such events, the country is compelled to excessive borrowing which consequently leads to high inflation and low living standards.
The efficiency of a production process is also determined by man power. For instance, the United States consists of about 5% of the world’s total population. Countries such as China and India consist of about three or four times the population of US. However, it is worth revisiting the fact that about half of the world population are living in poor conditions in Asia. Therefore, the only difference that the United States and Asia have is that the higher living standards of the former stem from the dynamism of the workforce.
In contrast, Asian countries have their workforce monopolized which limits the benefits associated with the production process. The availability of tools boosts the effectiveness of workforce in the production process. Machinery increases the output thresholds and at the same time reduces the time required to complete a given task. Thus, it is clear that an increase in the number of produced goods and services helps to better people’s lives since a variety of product is available for all classes of people. It is also important to consider the fact that increased production levels raise the revenues received by the government which serves to better the lives of citizens. The funds obtained from exports helps the government to provides better recreational and health service which serves to improve people’s lives.
The accrued rewards judge the success of any investment scheme. From this perspective, both firms and a country can consider increasing productivity as a measure of achieving high rewards in any investment. Generally, the term investment implies the ability to increase expenditure on any capital injected into a venture. The inability of most countries to utilize their natural resources is instigated by high costs associated with acquiring a given technology. Therefore, a nation can seek to empower science, education and technological institutions which will serve to invent alternative technologies that are cheaper. This move will provide the population with a way to explore new ideas which can increase the general productivity. Inspirations can be drawn from China's evolution since 1979. The country resorted to automate its production processes to produce abundant goods and services that could improve the living standards of citizens. With this strategy, the country has realized an upward growth of the economy in a short period. From being an underdeveloped nation, China has grown to command the second largest economy levels in the entire world. Therefore, it is very clear that a nation can increase its investment in productivity by investing in automation processes.
In contrast, firms have various ways to increase investment in productivity. However, all the techniques implemented by firms are anchored on the fundamental logic of reducing the time used to produce certain output units. This strategy can only be achieved through automation. With the heightening trends of globalization, firms need to embrace updated technological reforms to remain competitive in the market. Therefore, embracing technological advancements is a key strategy that can be used by a firm to improve on is productivity. However, this technique requires proper capital investment for acquiring new machines and for training the staff members. Also, firms can seek to establish research centers which serve to experiment with the ideas contributed by staff members. The establishment of research centers can also be used to come up with a team of skilled workers who can boost the production process. Skills and innovation not only increase the quantity of products and services produced but also their quality.
Furthermore, firms can increase investment on productivity by boosting the capital stock. This element not only implies the human and physical resources to be utilized but the level of utilization. Acquisition of machinery and staff education are some of the elements of capital stock. However, firms do not have funds readily available for this process. Therefore, they can seek other financiers such as banks to increase on the capital stocks. Increase in capital expenditure injects a firm’s production process with new tools and techniques which serves to improve on its productivity. Therefore, it is important for firms to invest in productivity by increasing its expenditure on available capital. Firms can also improve their investment on productivity by taking care of employee welfare. Provision of bonuses, housing allowances, and medical cover are some of the incentives that help to motivate employees. Because employee motivation is an instrumental tool in boosting productivity, it is important for a firm to consider keeping staff member happy at all times. Motivation among workers enhances efficiency in production.
