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Increases in output can only be due to increases in the inputs to the production process, or to the efficiency with which they are used.
Increases in inputs impose costs on society: increasing labor means having less leisure time; increasing investment in capital means lowering current consumption; and increasing material inputs reduces reserves of natural resources.
Productivity growth is our opportunity to increase output without increasing inputs and incurring these costs.
Historical or “time series” data on output and hours worked show the importance of increases in labor productivity to economic growth in the United States.
Productivity increases have enabled the U.S. business sector to produce nine times more goods and services since 1947 with a relatively small increase in hours worked.
With growth in productivity, an economy is able to produce—and consume—increasingly more goods and services for the same amount of work.
Productivity is important to individuals (workers and consumers), business leaders, and analysts (such as policymakers and government statisticians).