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Labour productivity is defined as output per unit of labour input.

Unit labour costs on the other hand refer to labour cost per unit of output.

Economic growth in an economy or a sector can be ascribed either to increased employment or to more effective work by those who are employed. The latter can be described through statistics on labour productivity. The driving forces behind improvements in labour productivity are the accumulation of machinery and equipment, improvements in organisation as well as physical and institutional infrastructures, improved health and skills of workers (“human capital”) and the generation of new technology.

Labour productivity estimates can:

- serve to develop and monitor the effects of labour market policies. For example, high labour productivity is often associated with high levels or particular types of human capital, indicating priorities for specific education and training policies;

- be used to understand the effects of wage settlements on rates of inflation or to ensure that such settlements will compensate workers for realised productivity improvements;

- contribute to the understanding of how labour market performance affects living standards.

Source Publication:
Key Indicators of the Labour Market (KILM): 2001-2002, International Labour Organisation, Geneva, 2002, page 621.

Cross References:
Unit labour costs - OECD

Statistical Theme: Labour statistics

Created on Thursday, August 8, 2002