How to Calculate Growth Rate of Labor Productivity

Labor Productivity Growth Rate Calculator

Base Period (Previous)

Units produced or total revenue

Total hours worked by staff

Current Period

Current units or revenue

Current hours worked

Calculation Results

Base Productivity

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Output per Hour

Current Productivity

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Output per Hour

Growth Rate

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Understanding Labor Productivity Growth

Labor productivity is a key economic indicator that measures the efficiency of a workforce. It represents the total volume of output (goods or services) produced per unit of labor (usually hours worked) during a specific time period. Calculating the growth rate of labor productivity allows businesses and economists to determine if they are becoming more efficient over time.

The Labor Productivity Formula

To calculate productivity for any single period, use the following formula:

Productivity = Total Output / Total Labor Hours

How to Calculate the Growth Rate

The growth rate compares the productivity of two different periods (usually year-over-year or quarter-over-quarter) to find the percentage change. Follow these steps:

1. Calculate Base Period Productivity: Divide output by hours for the first period.
2. Calculate Current Period Productivity: Divide output by hours for the second period.
3. Apply the Growth Formula:
   Growth Rate = ((Current Productivity – Base Productivity) / Base Productivity) * 100

Real-World Example

Imagine a manufacturing plant:

• Last Year (Base): They produced 100,000 widgets using 5,000 labor hours.
  Productivity = 100,000 / 5,000 = 20 widgets per hour.
• This Year (Current): They produced 120,000 widgets using 5,500 labor hours.
  Productivity = 120,000 / 5,500 = 21.82 widgets per hour.

The Growth Rate Calculation:
((21.82 – 20) / 20) * 100 = 9.1%.
This indicates the plant's efficiency improved by 9.1% over the year.

Why Track Productivity Growth?

Increasing labor productivity is essential because it allows a company (or a country) to produce more goods and services for the same amount of work. This leads to higher profits, better wages for employees, and overall economic expansion without necessarily increasing the workload.