Wednesday, November 2, 2011

Labor Productivity: History and Future

Labor productivity is the output of a worker in a given amount of time. If it takes you 10 minutes to change a car tire, that is your labor productivity for changing car tires. Put another way, you could change six car tires per hour.

Labor productivity has major economic implications. Producing more goods - food, clothing, medicine, and transportation, for example - that make us better off with less effort translates into an improved standard of living.

There are many ways to increase labor productivity. Upgrading equipment is one common way. You could also improve organization, buy better raw material, and specialize parts of the process. You could buy John an electric can opener to replace his manual one, and buy bread that has already been sliced.

From 1995 to 2010, Oregon's gross state product - the value of all goods and services produced in a year within the state's borders - increased from slightly more than $81 billion dollars to more than $174 billion dollars (2010 dollars). That's a doubling of output in 15 years!

That's an impressive feat, but there's another twist. Over the same period, Oregon's covered employment went from 1,298,521 to 1,652,859 workers. That 12 percent increase, while large, is dwarfed by the 114 percent increase in output. This implies that the average Oregon worker was producing much more (in dollar terms) than in 1995.

Some people lament the loss of jobs that typically accompanies labor productivity improvements. Certainly, economic transition can be painful to workers trying to develop new skills in an ever-evolving workplace. Still, the bulk of the economic growth that Oregon and the nation have enjoyed has come from improvements in labor productivity.

Get more information in the full article written by Workforce Analyst Christian Kaylor.

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