Production and productivity – Cont’d

HELLO, ALL. This week, we will tackle the following learning objectives, continuing under Section 5 of the syllabus:

Students should be able to:

3. Differentiate between production and productivity.

4. Explain the importance of productivity.

Objective number 4 is quite long, so we will do some of it in this lesson and complete it in the next lesson.

OBJECTIVE 3

In last week’s lesson, we defined ‘production’, and the essence of the term is that it is the putting together of different inputs or resources to make goods and provide services. A book is an example of a good, and hairdressing is an example of a service.

Productivity is often confused with production and defined in the same way. Productivity, however, refers to the rate of production in terms of output per unit of input.

The formula for measuring productivity is output/input. The answer will give us the output per unit of input, which is the same as average output.

We can measure productivity of any of the factors of production. For example, the productivity of labour would be output/number of employees and the productivity of capital would be output/ number of capital equipment employed.

Multifactor productivity is output/labour, capital, land, etc.

If after calculating productivity for two or more different periods, and the figures are increasing, it is an indication that efficiency is increasing, probably due to the quality and effectiveness of the factors or inputs.

In summary then, while production is the goods and services itself, productivity is the rate of the production in terms of how much is produced by each unit of input.

OBJECTIVE 4

Efficiency of factors of production implies that just the right amount and quality of the factor is being employed to give maximum output. Changes in productivity indicate changes in the efficiency of the factors of production. If more of a factor, or input, has to be used to produce the same output, then the efficiency of that factor has fallen.

For example, labour productivity:

■ PERIOD 1: 30/3=10. In this case, output is 30 and number of employees is 3, labour productivity is 10. This is the output per employee or the average output.

■ PERIOD 2: 40/2=20. In this case, output is now 40 and the number of employees is 2, so productivity has now risen to 20. Average output or output per employee has now risen from 10 to 20, even though the number of employees has fallen. An increase in output does not necessarily mean an increase in productivity. Consider Period 3 below:

■ PERIOD 3: 60/3=20. While output has increased, productivity has remained the same because the labour input has increased. If the labour input had increased to 5, the productivity would decrease to 12, i.e., 60/5=12.

The productivity of labour will tell us whether or not the labour has become more efficient. If the productivity has fallen, we can consider ways to increase it.

The efficiency of labour and, therefore, the productivity of labour is affected by the following:

(i) The amount and quality of education and training of the labour: the greater the quality of education and training, the greater will be efficiency.

(ii) The efficiency of factors of production and technology used by the labour: if labour has to work with poor factors of production and poor technology, then its efficiency will be poor.

(iii) Health and well-being of the labour force: a healthy labour force will be more efficient than an unhealthy one.

(iv) The extent to which job security and upward mobility can be assured: job security and promotions will encourage labour to work harder and, therefore, be more efficient.

(v) Working conditions under which labour exists: harsh physical and other working conditions can cause labour productivity to deteriorate.

(vi) Monetary and other benefits given to labour: monetary and non-monetary benefits encourage labour to be more efficient.

(vii) Attitude of workers towards work: positive work attitudes improve efficiency.

Review the lesson and try this question: (a)(i) Define ‘production’ and ‘productivity’. (4 marks)

(ii) Explain the difference between production and productivity, giving ONE example of EACH. (6 marks)

(b) Explain the relationship between productivity and efficiency. (2 marks)

(c) Discuss FOUR factors that can affect the efficiency of labour. (8 marks)

Total marks:20

Next week, I will complete the topics under Objective 4 and do Objectives 5 and 6. This will include looking at the role of capital and differentiating among the types of capital. Have a good week.