This article was co-authored by Michael R. Lewis. Michael R. Lewis is a retired corporate executive, entrepreneur, and investment advisor in Texas. He has over 40 years of experience in business and finance, including as a Vice President for Blue Cross Blue Shield of Texas. He has a BBA in Industrial Management from the University of Texas at Austin.
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The economic health of a country is most often determined by their labor productivity. Labor productivity is a per-hour measurement of GDP (gross domestic product) produced on a per-worker basis. In layman's terms, it is the value of the work a worker completes in an average hour.[1] As more and more work is produced in an hour, the overall productivity level increases, which signifies a healthy and expanding economy.
Steps
Calculating Labor Productivity
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1Determine the country's Gross Domestic Product (GDP). The GDP of a country is the measure of goods and services produced within a specific time period.[2] You'll need that number to calculate productivity based on GDP.
- You usually won't have to calculate the number yourself (that would be very difficult). Instead, you can find the number already calculated for you.
- You should be able to find the GDP of most countries online. Start by Googling the country's name plus "GDP". You can also find the GDP of many countries at the World Bank website.[3]
- Make sure you find the right GDP for the time period that you're measuring (e.g., for a quarter or a year).
- Keep in mind that the GDP number for the target country, even if it's released for a quarter, might be given as an annualized number. In that case, divide the annualized number by four to get the quarterly number.
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2Calculate the number of total productive hours for a country. Basically, you're calculating the number of so-called "man-hours" worked to produce products and services. For any country, find the number of people in the workforce for the given period and multiply it by the average number of hours worked.
- For example, if the average number of hours worked is 40 and there are 100 million people in the country, then the total productive hours is 40 x 100,000,000 or 4,000,000,000.
- In the United States, you can find the key statistics on the website of the Bureau of Labor Statistics (BLS).[4] [5]
- Labor productivity for other countries can be found by searching online for relevant economic research.
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3Calculate productivity. Just divide the GDP by the total productive hours. The result will give you the productivity for that country.
- For example, if the country's GDP is $100 billion and the productive hours are 4 billion, then the productivity is $100 billion / 4 billion or $25 of output per hour worked.
Calculating Individual Worker Productivity
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1Get the country's Gross Domestic Product (GDP). The GDP measures a nation's total economic activity in terms of the goods and services produced.[6] You'll need that number to calculate productivity based on GDP.
- Fortunately, the GDP is a figure that's already calculated for you and delivered by one of the country's agencies.
- The GDP for many countries is available online. Google the country's name plus "GDP". You can also find the GDP of many countries at the World Bank website.[7]
- Find the GDP figure for the time period that you're measuring (e.g., for a quarter or a year).
- If the quarterly GDP figure is released as an annualized number (as is the case in the United States), divide it by four if you want a quarterly measurement.
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2Find the number of employed people in the country. To calculate worker productivity, you'll need to find the number of people who are employed in the country.
- In the United States, you can find the key statistics on the website of the Bureau of Labor Statistics (BLS).[8] For other countries, you'll have to Google around.
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3Calculate individual worker productivity. Just divide the GDP by the total number of people employed. The result will give you the labor productivity for that country.
- For example, if the country's GDP is $100 billion and the total number of people employed is 100 million, then the worker productivity is 100 billion / 100 million or 1,000 units of output produced per person employed.
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4Use your calculated worker productivity. Worker productivity can be used to estimate how much an increase in population or employment can affect GDP. Multiply worker productivity by the increase in the number of workers to estimate how much GDP will be affected by the new workers.
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References
- ↑ http://www.investopedia.com/terms/l/labor-productivity.asp?layout=infini&v=4A&adtest=4A
- ↑ http://www.investopedia.com/articles/investing/051415/how-calculate-gdp-country.asp
- ↑ http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
- ↑ http://www.bls.gov/news.release/empsit.t18.htm
- ↑ http://www.bls.gov/news.release/empsit.a.htm
- ↑ http://www.investopedia.com/articles/investing/051415/how-calculate-gdp-country.asp
- ↑ http://data.worldbank.org/indicator/NY.GDP.MKTP.CD
- ↑ http://www.bls.gov/news.release/empsit.a.htm
About This Article
To calculate productivity, start by multiplying the number of people in the workforce by the average number of hours they worked during a given time period. For example, if there are 100 million people in a country that work 40 hours a week, there would be 4 billion total productive hours. Then, divide the country’s gross domestic product for that time period by the productive hours. If, for example, a country’s GDP is $100 billion and the productive hours are 4 billion, the productivity is $25 per hour. For tips on how to calculate the productivity of an individual worker, read on!
