Labor productivity and relative wages have increased during
the third quarter of 2014. The U.S. Bureau of Labor Statistics reported that
output increased 4.4%, labor productivity rose 2 %, and working hours increased
2.3%. When comparing the third quarter of 2013 to 2014 you find that
productivity increased a total of .9%. Hourly compensation also increased 2.3%
putting more money into worker’s pockets.
American workers have a tough job and are trying to forget
the nasty years of the recession. Improving productivity and subsequently
raising wages has a duel benefit of keeping overall costs lower, effective use
of labor resources, and paying productive workers higher compensation. It is a
win-win situation for investors, business owners, and employees.
Labor productivity is calculated by dividing an index of real
output with an index of all hours worked. It is a fairly simply calculation
that determines how much per unit productivity each worker increased or
decreased over a certain period. In this case, productivity over the third
quarter rose 2% which is a positive marker that encourages higher economic
activity.
Consider the hundreds of millions of dollars that are spend
on a single investment to open a new manufacturing plant or business within the
United States. Investments on this scale consider a whole range of expenses ranging
from local, state, and federal taxes all the way over to worker productivity. Low
productivity requires additional resources to train and improve before actual
business occurs.
Productivity also becomes a marker of a worker’s value when
compared to other workers on the global economy. If American workers can
produce more and create sophisticated products they naturally have higher value
than those that can only complete only simple duties. An increase in employee
productivity is a beneficial marker for improvements in other areas of the
economy.
