How is productivity measured? > Calculating productivity

How is productivity calculated?

While it is possible to compute labor productivity levels, productivity analysis generally involves measuring productivity changes over time.

Percent changes, indexes and average annual percent changes can all indicate how much productivity has changed from one period to the next or over several periods.

Percent changes measure change from one period to the next.

Percent changes can be calculated using either productivity levels—stated in units or constant dollars per hour—or productivity indexes.

Indexes measure total percent changes from a base period.

Any time period can be used as the base period. Indexes are usually set equal to 100 in the base period.

A labor productivity index can be calculated by dividing an index of output by an index of hours worked. When more than one index is included in a calculation, all the indexes must have the same base period.

Productivity indexes measure the total percent change from a base period. Example: a productivity index of 109.8 indicates a 9.8 percent increase from the base period.

Percent changes measure the change in productivity from one period to the next.

Average annual percent changes measure change over several periods stated at an average yearly rate.

Average annual percent changes can be calculated using either productivity levels—stated in units or constant dollars per hour—or productivity indexes.

Average annual percent changes measure the change over a period of two or more years. They show the average rate of growth (or decline) in productivity per year.

The level of productivity is the ratio of output to inputs. (For labor productivity, the input is only labor, for other measures of productivity, the input is an index of combined inputs.)

The percent change in a ratio is approximately equal to the percent change in the numerator minus the percent change in the denominator.

Click for example
If it is reported that labor productivity grew by 1.6% this quarter, then the difference between the % change in output and the % change in hours worked was 1.6.