How Do You Calculate Labor Productivity?
According to the Bureau of Labor Statistics, labor productivity is a measure of the efficiency of the labor used in the production of goods for a nation or company. This is derived by dividing the value of the goods produced by the number of man hours needed to produce them. The result is shown as productivity per hour.
- Determine the value of production
Add up the total value of the goods or services produced during the productivity period. Show either the monetary value of the goods or the number of units produced. For a nation, use the GDP to determine the total output.
- Determine the number of labor hours
Add up the number of man hours spent during the productivity period to create the goods or services provided.
- Calculate labor productivity
Divide the total productive output by the total man hours during the productivity period to calculate the labor productivity. For example, a country that produces $10 trillion worth of goods in a year with 200 billion man hours of labor has a labor productivity of $50 per hour. The same calculation can be used at the company or industry level to determine productivity and to spot trends over time.