2.3 Productivity

Economic and management sciences

Grade 9

Sustainable growth and development

Module 11

Productivity

Productivity can be described as the amount of goods and services produced per worker per hour. This refers to the ratio between real production and the number of inputs that are needed to manufacture it ; the productivity of labour increases, for example, if the output (the number of units that are produced) increases by 10% while the input (number of working hours) remains the same.

There is an important relationship between productivity and economic growth in the sense that improved productivity always is a prerequisite for economic growth.

For the effect of productivity on economic growth to be understood, it is necessary to distinguish between the following concepts:

1. EXTENSIVE ECONOMIC GROWTH refers to the extension of total production of goods and services irrespective of whether there is increased productivity per person. According to this, extensive economic growth is possible even though there may be no increase in production per person

2. INTENSIVE ECONOMIC GROWTH refers to the increase in production per person (or per capita). When intensive economic growth occurs, total production increases more rapidly than the population. Per capita growth (or income) therefore is an indicator of economic growth.

When a community’s production of goods and services expands more rapidly than the population increases, real per capita income rises. This generally means that the economic prosperity of the population will increase, which reflects economic growth.

Therefore: growth in production that is larger than growth in population leads to:

• rise in real per capita income, which leads to
• increased economic growth and
• economic prosperity

Inversely, a decrease in real per capita income will occur if the population increase is greater than the increase in production. Economic decline, the opposite of intensive growth, will therefore occur.

Therefore: growth in production that is smaller than growth in population leads to

• decline in real per capita income, which leads to:
• economic decline and
• decline in economic prosperity (rising poverty)

With increased productivity, the products of a country become more competitive on international markets and this can lead to increased exports. The reason for this is that

increased productivity can absorb wage increases, which makes it possible for business enterprises to keep the prices of their products stable.

Activity 1: productivity of labour

Identify TEN factors that could lead to improvement in labour productivity. Provide a full explanation of each one.

• Also provide a report for presentation to the class.

Activity 2: labour productivity in south africa [lo 2.4]

Do you think labour productivity in South Africa is of a standard that makes it possible to compete effectively on international markets? Motivate your answer so that points of view can be debated in the class.

Sources:

• Gwartney, James D ECONOMICS, Private and Public Choice, Sixth Edition
• Stroup, Richard L The Dryden Press, Harcourt Brace College Publishers, Orlando, 1992

Assessment

Memorandum

ACTIVITY 1: PRODUCTIVITY OF LABOUR

Factors that could lead to improvement in labour productivity (the concepts should be defined clearly and explained adequately).

1. Climate

2. Own culture

3. Renumeration of wages

4. Working hours

5. Working conditions

6. Health and strength

7. Intelligence

8. Training and education

9. Social attitude

10. Organisation of labour

ACTIVITY 2: LABOUR PRODUCTIVITY IN SOUTH AFRICA

Groups are to state their points of view regarding labour productivity in South Africa, taking note particularly of conditions or situations in their own environment where contractors do not operate effectively and workers do not provide maximum input to benefit their employers.