The welfare of individuals, the growth of enterprises and the development of the national economies are largely dependent on their comparative productivity. There may exist the differences among the various countries of the world based on political ideologies, economic systems or some such reasons but all unanimously recognize the importance of the improvement in the productivity levels. Productivity is a ratio between the output of the wealth produced and the input of resources used in the process of any economic activity. There always exists a scarcity of input of resources and each input process certain inherent input creativity which is translated into output. The input creativity can yield greater mount of output through conversion efficiency.
Here lies the importance of improvement in productivity levels. The concept of productivity of course, with some degree of confusion has remained a continuous and challenging area of study. The changes in the productivity levels greatly influence a wide range of human, economic and social considerations, such a higher standard of living, rapid economic growth, improvement in balance of payments, control of inflation culture of the nation etc.
The productivity in a most simple way may be defined as ratio of output to input. It is expressed as under:
P = O / I or Productivity = Output / Input
According to Oxford Illustrated Dictionary, productivity is defined as efficiency in industrial production to be measured by some relationship of outputs to inputs.
According to Encyclopedia Britannica Productivity according to economics is the ratio of what is produced to and what is required to produce it. Usually this ratio is in the form of an average expressing the total output of some category of goods divided by the total input of say, labor of raw materials. In principle, any input can be used in the denominator of the productivity ratio. Thus one can speak of productivity of land, labor, capital or sub-categories of any of these factors of production.
It should be noted that, the concept of productivity is so closely attached to the labor input that the term productivity is almost used as the synonym of productivity of labor. International Labor Organization (ILO) defined productivity as, the ratio between the volume of output as measured by production indices and corresponding volume of labor input as measured by employment indices. The most important reasons why labor is used as the commonest factor in measuring productivity are: (1) it is easy and precise to measure the units of labor inputs a compared to other inputs like materials, capital etc. The productivity can be very easily measured in terms of output per man, output per man hour or output per unit of labor time. (2) Labor input is universally applied to all types of plants and processes and productions, (3) it has become a common practice to link wages, with the productivity.
However, the consideration of the concept of productivity with Reference to the labor only suffers from the following limitations:
1) The output ascertained per man-hour does not measure the productive efficiency as a whole, or even the productive of the labor.
2) An increase in output pr man hour may or may not be desirable. Moreover, it may or may not reduce the unit labor cost.
3) If the increase in output per man hour is accompanied by only a proportionate increase in hourly wage rate, the production costs are more likely to increase than to remain unchanged in capital intensive industries like iron and steel industry.
4) Output should not be considered in terms of tangible work but the aspects such as pleasure and work satisfaction which the workers derive from the work should also be considered. So also, under the input consideration, due weigthage should also be given to the factors such as fatigue, effect on health, monotony, ability to enjoy the leisure time, recreation etc. The measurement of such factors is difficult and may result into subjective consideration.