Learn › Economic theory › Firms and competition

Firms and competition · 27 of 34

Labour productivity

Calculate output per worker, output per hour and unit labour cost from a firm's figures

Key terms
Labour productivity
Labour productivity is output per unit of labour input, measured either as output per worker or as output per hour worked.
Unit labour cost
Unit labour cost is the total cost of the labour involved in producing one unit of output.

Output per hour rises when workers have more skills, capital or technology

Labour productivity is calculated by dividing output by labour input. Output per hour worked is the safer guide when hours change: a firm that moves staff from full-time to part-time sees output per worker fall even if each hour is as productive as before. Productivity rises with human capital, the knowledge and skills workers bring; with technological change; with economies of scale; and with more capital for each worker to use.