Productivity
Interpreted correctly, these components are indicative of productivity development, and approximate the efficiency with which inputs are used in an economy to produce goods and services.
Tabulating machines for data processing began being widely used in the 1920s and 1930s and remained in use until mainframe computers became widespread in the late 1960s through the 1970s.
By the late 1970s inexpensive computers allowed industrial operations to perform process control and track productivity.
The use of capital in the GDP-measure is considered to be as valuable as the production's ability to pay taxes, profits and labor compensation.
[citation needed] When multiple inputs are considered, the measure is called multi-factor productivity or MFP.
[12] TFP is often interpreted as a rough average measure of productivity, more specifically the contribution to economic growth made by factors such as technical and organisational innovation.
[6] The most famous description is that of Robert Solow's (1957): "I am using the phrase 'technical change' as a shorthand expression for any kind of shift in the production function.
Thus slowdowns, speed ups, improvements in the education of the labor force and all sorts of things will appear as 'technical change' ."
This ignorance covers many components, some wanted (like the effects of technical and organizational innovation), others unwanted (measurement error, omitted variables, aggregation bias, model misspecification)[15] Hence the relationship between TFP and productivity remains unclear.
The income change created by production function is always distributed to the stakeholders as economic values within the review period.
At a firm or industry level, the benefits of productivity growth can be distributed in a number of different ways: Productivity growth is important to the firm because it means that it can meet its (perhaps growing) obligations to workers, shareholders, and governments (taxes and regulation), and still remain competitive or even improve its competitiveness in the market place.
A famous example is the assembly line and the process of mass production that appeared in the decade following commercial introduction of the automobile.
The Office for National Statistics (UK) identifies five drivers that interact to underlie long-term productivity performance: investment, innovation, skills, enterprise and competition.
[22] Technology has enabled massive personal productivity gains—computers, spreadsheets, email, and other advances have made it possible for a knowledge worker to seemingly produce more in a day than was previously possible in a year.
[23] Environmental factors such as sleep and leisure play a significant role in work productivity and received wage.
[27] There is also considerable evidence to support improved productivity through operant conditioning reinforcement,[28] successful gamification engagement,[29] and research-based recommendations on principles and implementation guidelines for using monetary rewards effectively.
[37] In companies where the traditional hierarchy has been removed in favor of an egalitarian, team-based setup, the employees are often happier, and individual productivity is improved (as they themselves are better placed to increase the efficiency of the workfloor).
[38][39][40][41][42] The Kaizen system of bottom-up, continuous improvement was first practiced by Japanese manufacturers after World War II, most notably as part of The Toyota Way.
Whether they have a formal program or not, companies are constantly looking for ways to improve quality, reduce downtime and inputs of labor, materials, energy and purchased services.
Often simple changes to operating methods or processes increase productivity, but the biggest gains are normally from adopting new technologies, which may require capital expenditures for new equipment, computers or software.
[44] The past few years have seen a positive uptick in the number of software solutions focused on improving office productivity.
A nation's average productivity level can also be affected by the movement of resources from low-productivity to high-productivity industries and activities.
At the national level, productivity growth raises living standards because more real income improves people's ability to purchase goods and services (whether they are necessities or luxuries), enjoy leisure, improve housing and education and contribute to social and environmental programs.
Some have suggested that the UK's 'productivity puzzle' is an urgent issue for policy makers and businesses to address in order to sustain growth.
Nothing contributes more to reduction of poverty, to increases in leisure, and to the country's ability to finance education, public health, environment and the arts’.
