ProductivityStandard of living

Definition of productivity

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Standard of livingThe extent to which a person is able to provide the things that

are necessary for sustaining and enjoying life.Standard of living of a representative family differs greatly in

different parts of the world.What is considered a necessity in one part of the world could

be considered a luxury in the other.Basic necessities of a minimum decent standard of living:

Food, clothing, housing and hygiene. Also, security and education also considered constituents.

Greater the amount of goods and services produced in any community, the higher its the average standard of living.

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Standard of livingThere are two ways of increasing the amount of goods and

services produced: - Increase the employment and investment in creating jobs. So

that more people are producing goods required for the society. - Increase productivity. Same amount of labor produces more

goods.We want:More and cheaper food by increase in agricultural productivityMore and cheaper clothing and housing by increased industrial

productivityMore hygiene, security and education by increasing overall

productivity.

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ProductivityRatio between output and input.Arithmetic ratio of the amount produced to the amount of any

resources used in the production.The resources may be: land, material, plant, machines, tools,

labor. It could be combination of all!Over a period of time, one can see if the productivity has

increased. How?Combination of improved technology, better planning, greater

skills etc.

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ProductivityNote that, increased production does not mean increased

productivity.Higher productivity means that more is produced with the

same expenditure of resources; that is, at the same cost in terms of land, material, machine, time or labor.

Alternatively, same amount is produced at less cost in terms of land, labor, material etc; thereby releasing some of these resources for the production of other things.

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Productivity and standard of living If more is available at the same cost, or the same amount is

available at lesser cost the whole community benefits.

As per the ILO, higher productivity provides ways for raising the standard of living by:

1. Larger supplies of both consumer goods and capital goods at lower cost and prices

2. Higher real earnings3. Improvement in working conditions, e.g. by reduced working

hours4. In general, strengthening of the economic foundations of

human well-being.

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Productivity in industryMany factors affecting productivity of each organization; also,

they are dependent.Depending on the individual environments, decisions are to be

made.Industries where labor and capital costs are low compared to

the material costs, better use of material and plant gives the greatest scope of cost reduction.

In countries where capital and skilled labor are in shortage compared to unskilled labor, one should look to increase the output per machine or per skilled worker.

Increasing the number of unskilled workers may be beneficial if by doing so an expensive machine or skilled craftsmen are enabled to increase production.

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Government’s responsibility Government can create conditions favorable to raise

productivity. It can:1. Have a balanced programs of economic development2. Take steps necessary to maintain employment3. Make opportunities for employment. Last step is specifically important for a developing country

like India. Government should make provisions for workers who are

going to loose jobs because of technology improvement – training and education programs.

Example: India’s First Five-Year Plan (1952).

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Management’s responsibilityThe main responsibility for raising productivity in an

individual organization lies with the management.It can implement productivity programs.It can create a positive environment and obtain co-operation of

the employees.Trade unions should encourage its members to provide such

co-operation when the productivity program is beneficial to workers, as well as the organization on the whole.

We will look at management’s role in increasing productivity of individual resource:

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Productivity of materialAt the design stage:Ensure least consumption of material,Purchase equipments and plants such that consumption of

material is economical.

At the operation stage: Use of correct process,Right use of the process,Operator training,Proper handling and storage of products at all stages,Proper packaging to reduce damage in transit.

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Productivity of land, machines and manpowerEffective utilization and maximum productivity is an important

source of cost reduction.Reduction in the original specification, before the land is

purchased saves capital outlay (as well as interest expenses)A savings in material which has to be imported saves import

duty and excise.

Productivity of manpower and machines is typically measured in terms of time (man-hours; machine-hours).

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Factors tending to reduce productivityWork content added due to the product design for a

manufacturing firm:The product or its components are designed such that it is

impossible to use most economical manufacturing processes.Excessive variety or lack of standardization.Incorrect quality standards.Excessive amount of material removal required.

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Factors tending to reduce productivityWork content added due to process:Incorrect production process (and/or machine) used Process not operated properlyNon-optimal layout with wasted movements.Working methods of operation causing wasted movements,

time and efforts.

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Factors tending to reduce productivityIneffective time due to managementMarketing policy which demands unnecessarily large number

of products.No standardization of components between as well as within

products.Failing to meet customer’s requirement from the beginning.No plan for flow of work.Improper supply of material, equipment.Improper maintenance of plant and machines.Insufficient safety measures.Improper working conditions resulting in interrupted work.

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Factors tending to reduce productivityIneffective time within the control of worker: Taking time off without good cause: by lateness, by idling at

work etc.Careless workmanship causing scrap or rework.Failing to observe safety standards.