What is productivity?

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Productivity measures the efficiency with which an economy transforms inputs into outputs. Statistics Canada produces summary statistics to capture various aspects of this process.

The least complex are partial measures of productivity—that consider a single input like labour or capital. Labour productivity is measured as gross domestic product (GDP) per hour worked. Capital productivity is measured as GDP per unit of capital.

More complex measures take into account more than one input simultaneously—for example, labour and capital taken together. These are called multifactor productivity (MFP) measures and are measured as GDP per unit of a combined bundle of labour and capital.

MFP measures were devised to allow analysis of the underlying changes in the economy—to allow analysts to better understand the forces that are driving growth than simple partial measures provide. For example, understanding the growth process requires that we understand the sources of labour productivity growth.

Growth in labour productivity is intrinsically of interest because of its close relationship over time with changes in real labour compensation. Of interest is the cause of that growth. Growth in labour productivity may come from applying more capital (machinery and equipment, structures) to the production process or from technological change. And to the extent that the sources of growth from these two sources can be decoupled, the effect of policies that affect these two differentially can be evaluated. MFP measures are used to do just this.

Productivity can be measured either in level or growth terms—as is GDP. But as with GDP, most attention is focused on productivity growth—and a great deal of attention is devoted to comparisons of productivity growth across countries.