Bacoconsultants
Labor productivity in an organization can be calculated by dividing total output in a given period of time ( for example , each day , week or month ) by the number of workers employed .
Average product of labor = Total output/ Number of employees
A firm can attempt to raise the productivity of its workers through a combination of the following:
- Training workers to improve their existing skills and learn new skills.
- Rewarding increased productivity with performance – related pay and bonus payments.
- Encouraging employees to buy shares in their organization. Improved productivity will help to raise profits and pay higher dividends on shares.
- Improving job satisfaction – for example, by improving the working environment, making jobs more interesting, team working, involving workers in business decision making and giving regular feedback on performance.
- Replacing old plant and machinery with new, more efficient machines and tools for workers to use.
- Introducing new production processes and working practices designed to reduce waste , improve quality and increase output – for example , computer – aided design and manufacturing , robotic assembly lines and recycling.
Many of the above will tend to raise the cost of employing labor in the short run . However, if productivity improves , average costs will fall and profits will tend to rise . Lower costs can be passed on to consumers as lower prices in an attempt to increase consumer demand and generate more sales revenues . If consumer demand expands , then the demand for labor may also increase .