Udhna College Notes Unit 1: Introduction to technology and Productivity

TYPES OF PRODUCTIVITY

Productivity, the ratio of goods and services (output) to the resources (input) used. This can be
classified as follows,

 Labour Productivity
 Capital Productivity
 Material Productivity

LABOUR PRODUCTIVITY

Labour productivity is also known as workforce productivity. Labour productivity measures output
per labour hour. The amount of real gross domestic product (GDP) produced by an hour of labour.
Labour productivity is different from employee productivity, which is a measure of an individual
worker's output.

Growth in labour productivity depends on three main factors:

 saving and investment in physical capital

 new technology
 human capital

Labour productivity formula can be expressed as:

Labour Productivity = Total Output / Total Man-Hours

Consider, Company ABC produced Rs.2,50,000 worth of products this month and spent a total of
10,000 man-hours to do it. Calculate labour productivity in terms of output per hour.

Labour Productivity = Rs. 250,000 / 10,000 = Rs. 25 per man-hour

CAPITAL PRODUCTIVITY

The measure of how well physical capital is used in providing goods and services.

Capital productivity formula can be expressed as:

Capital productivity = Total output / Total capital

Example, a construction company buys a crane and uses the crane to build apartments for many
years. In this case, the capital productivity is high.

A laptop begins to deteriorate shortly after purchase, especially the battery. By the second year, the
battery may need replacing. Additionally, new software will be incompatible with the laptop, making
it obsolete. Here, capital productivity decreases.

MATERIAL PRODUCTIVITY

The amount of economic output generated (in terms of GDP) per unit of materials consumed or the
material cost. Material productivity formula can be expressed as:

Material productivity = Total output/ Total material cost

Udhna College Notes Unit 1: Introduction to technology and Productivity

Example,

A cement manufacturing company produced 800 bags of cement in a particular month. The raw
materials for cement is given below. Calculate the material productivity.

RAW MATERIALS STANDARD QUANTITY /BAG STANDARD COST

Clay 12 kg Rs. 30/kg
Limestone 10 kg Rs. 50/kg
Sand 20 kg Rs. 10/kg

Total material cost per bag of cement,

Clay = 12 x 30 = Rs. 360

Limestone = 10 x 50 = Rs. 500

Sand = 20 x 10 = Rs. 200

Total material cost of cement = Rs. 1060

Material productivity = 800/1060 = 0.75