Labour Productivity

Labour productivity measures how much output an economy produces per unit of labour input. At the economy-wide level, it is conventionally calculated as real GDP per worker or, where reliable data are available, real GDP per hour worked.

Conventional calculation

The numerator must represent output in volume terms, so GDP at constant prices is generally used rather than nominal GDP. The denominator represents labour actually used in producing that output.

• Output per worker is calculated as real GDP divided by the average number of employed persons during the period.
• Output per hour is calculated as real GDP divided by total hours worked; it better captures differences in working time, part-time work, and overtime.
• For sectors or industries, real gross value added per worker or hour is commonly used instead of economy-wide GDP.

Comparisons over time and across economies

Productivity growth is measured by the percentage change in output per worker or per hour between periods. Constant-price output permits comparison over time, while cross-country level comparisons generally require output converted using purchasing power parity and harmonised labour data.

Interpretation and limitations

The indicator measures the efficiency with which labour is combined with other productive inputs; it is not a measure of worker effort alone.

• Higher labour productivity may result from better capital, technology, skills, infrastructure, or organisation.
• Aggregate productivity can change when workers shift between sectors with different output levels, even without productivity changes within each sector.
• Labour productivity differs from GDP per capita because its denominator is labour input, not the total population.
• It also differs from total factor productivity, which relates output to combined labour and capital inputs.

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