Definition of Labor Productivity

ENL uses the conventional definition of labor productivity: the quantity of an intermediate or final output produced per unit of labor time expended in its production.

It is therefore calculated by dividing output quantity by time, where the latter is generally expressed in hours:

LP = Q/t

For example, if it takes 100 hours to produce 200,000 loaves of bread, labor productivity for this final output is 2,000 loaves per hour.

Because the definition makes no reference to potential value, a similar statement can be made for an intermediate output such as transport trucks: if it takes 10,000 hours to produce two trucks, labor productivity is one truck per 5,000 hours.

Final outputs must be considered first because these are assessed on the basis of both potential value and cost. We then consider intermediate outputs, which must be assessed on the basis of cost alone.

For brevity, “labor productivity” is shortened to “productivity” throughout this section.

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