There are many discusses of whether productivity just means labor productivity or not. This is considered widely as the measure of output products which are produced in an hour of labor. And multi-factor productivity is broader than labor productivity.

While labor productivity is more likely to focus on just manufacturing than services, on the other side multi-factor productivity may take the computation some levels up.

Since productivity is known as one of the indicators of economy, it is a measure of the economy efficiency transforming its capital, raw materials and labor into services and goods.

Traditional productivity measurement

Productivity measurement in car manufacturing plant is very simple. This is a physical measure dividing the total number of vehicles which are produced in a time period by the number of working hours in order to produce them.

Another way of productivity measurement is called monetary measure. It can be calculated by deviding the money value of the vehicles produced in a specific time period by the number of working hours needed to produce them.

KLEMS

The equation in labor productivity is simply output divided by the input (O / I).

Otherwise, the growth of multi-factor productivity is the rate of the growth of output which is relative all of production inputs growth - energy, labor, services and materials.

In this equation, Multi-factor Productivity = Output devided by(KLEMS), in which K is for capital services, L is for labor service, E is for the energy, M is for materials and S is for purchased services.

This equation is an index number which is very complicated. The goal is for arriving at a number of changes in output in relation to the changes of all input entries. Theoretically, more comprehensive the figure is , the more difficult to calculate.

Old assembly plant

In an old story, Mr. Triplett visited an old assembly plant. Workers still followed the same old routine to bring the materials in the 1st floor, do the same old sub-assembly in the 2nd floor as well as the same old final assembly in the higher floor.

Over years, these assembled machines got bigger and were difficult to be brought them from the higher floor to lower floor. Finally someone suggested them to reverse all things: bring materials to the higher floor, do sub-assembly in the 2nd floor as well as final assembly at the 1st floor

It really made a positive effect on their productivity. Then they could produce many more products without increasing the number of workers. And Mr. Triplett made many comments on the change in multi-factor productivity due to KLEMS.

He mentioned that the man making this suggestion was an "S" of the KLEMS. In case this man was an advisor and he was paid for it, that would be an "S" in that equation and not show any increase in the output of multi-factor productivity.

Otherwise, if this idea was of a smart worker and he was not paid for it, then no input is recorded. In conventional accounting, the record be an increase in the side of multi-factor productivity.

Author's Bio:

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