Productivity, Concept of

PRODUCTIVITY, CONCEPT OF

PRODUCTIVITY, CONCEPT OF. The word productivity usually denotes the ratio of economic output to any or all associated inputs (in real terms), or output per unit of productive input. Increases in productivity mean that the amount of goods and services available per capita is growing, assuming a constant population. Factors that might lead to increases in productivity include technological innovation, capital accumulation, increased skill of workers, increased access to natural resources, changes in labor processes such as division and specialization, changes in business practices, and changes in patterns of trade. In fact, all of these factors propelled economic growth in the United States in the nineteenth and early twentieth centuries. Better machinery meant less farmers could produce more food. From 1870 to 1829, the actual output of crops increased while the proportion of the labor force on the farm decreased from 50 percent to 20 percent. Industrial productivity also surged at the same time. For example, the amount of steel produced per worker tripled between 1870 and 1900 and tripled again between 1900 and 1929.

Increasing productivity does not necessarily lead to comparable increases in wages or standard of living, however. During the 1920s, output per worker rose steadily in the manufacturing and mining sectors of the economy, but worker earnings did not keep up. In fact, yearly earnings in mining fell 13 percent between 1920 and 1929, despite a 43 percent increase in output per person during the same period. Higher productivity mainly translated into higher corporate profits rather than higher wages. Higher profits signaled an increasing income disparity that undermined the ability of the economy to recover when the stock market, fueled by higher profits during most of the 1920s, went bust in 1929.

The federal government began trying to understand U.S. productivity long before the economy sank in the 1930s. The earliest studies of output per man-hour in the United States were made in the late nineteenth century. The Bureau of Labor in the Department of the Interior, under the direction of Commissioner Carroll D. Wright, measured the labor-displacing effects of machinery. The next broad studies were made by the National Research Project of the Works Progress Administration in the 1930s, again because of concern with possible "technological unemployment." The Bureau of Labor Statistics in the U.S. Department of Labor made measurement of output per man-hour in major industries and sectors of the United States a regular part of federal government statistical programs in 1940. The focus after World War II was on (1)the contribution of productivity to economic growth and (2)the use of the trend-rate of productivity advance as a guide to noninflationary wage increases under the voluntary stabilization programs of the 1960s and the wage-price controls that were in effect from late 1971 to 1974. Estimates of productivity also were provided in a series of studies sponsored by the National Bureau of Economic Research beginning in the 1930s and expanded after World War II to include capital productivity and total productivity.

BIBLIOGRAPHY

Cochran, Thomas C. Frontiers of Change: Early Industrialism in America. New York: Oxford University Press, 1981.

Heibroner, Robert, and Aaron Singer. The Economic Transformation of America: 1600 to the Present. 4th ed. Fort Worth, Tex.: Harcourt Brace, 1999.

Kendrick, John W., and Elliot S. Grossman. Productivity in the United States: Trends and Cycles. Baltimore: Johns Hopkins University Press, 1980.

Lewis, Walter Edwin. Yankee Ingenuity, Yankee Know-How. New York: Vantage Press, 1998.

McElvaine, Robert S. The Great Depression: America, 1929–1941. New York: Times Books, 1993.

John W. Kendrick / c. r. p.

See also Agricultural Machinery ; Agriculture ; Assembly Line ; Capitalism ; Computers and Computer Industry ; Great Depression ; Industrial Revolution ; Labor, Department of ; Standards of Living ; and vol. 9: The Principles of Scientific Management .